AMAZON INVENTORY PERFORMANCE INDEX
In 2018, Amazon revealed its intention to limit storage for sellers with a low Inventory Performance Index effective. This blog investigates Amazon’s newest seller metric and what the Amazon Inventory Performance Index means for Professional FBA sellers.
Amazon states the metric is based on “how well you drive sales by stocking popular products and efficiently managing on-hand inventory”.
Scores range from zero to 1,000. A score above 500 (previously this was 350 and 400) indicates that your business is excelling whilst a score below 450 indicates that there are issues and you should take action to improve your score.
Amazon has not revealed exactly how IPI scores are calculated. Amazon may limit access to storage for sellers with an Inventory Performance Index below its minimum threshold. Sellers who maintain an index score of 500 or greater will have unlimited storage for standard size and oversized items.
Starting October 1, 2019, storage limits will be adjusted on a quarterly cycle. You will achieve unlimited storage if your IPI score is above 350 either (a) six weeks before the end of the current quarter OR (b) during the last full week of the current quarter. If either condition is met, then you will have unlimited storage the following quarter. If your score is below 350 six weeks before the start of a quarter, you will receive a notification informing you of your potential storage limits.
Inventory Performance Dashboard
On the Inventory Performance Dashboard, Amazon provides sellers with three specific steps to increase their score.
- Excess Inventory suggestions to reduce your storage fees and carrying costs.
- Restock recommendations to increase your in-stock rate.
- Stranded Inventory actions to ensure your inventory is available for purchase.
Inventory Performance Index Factors
The new metric has three top influencing factors:
- Excess inventory and sell-through
The number of units for which the cost of holding your inventory would likely be more than the cost of taking action (such as reducing prices to increase sell-through or removing excess units). This value is based on product demand and your costs (including fees, unit costs, and cost of capital inputs).
- In-stock inventory
This is the percentage of time your ASINs have been in stock during the last 30 days, weighted by the number of units sold for each SKU in the last 60 days. Amazon provides recommendations on what to restock and when. While staying in stock with the right ASIN can help increase a seller’s Inventory Performance Index, there is no penalty for not restocking a discontinued or non-replenishable item.
- Stranded inventory
This is when products that are in Amazon’s fulfillment centers but are not available for purchase due to a listing problem. You should check for stranded inventory on a regular basis as you may need to edit a listing or create a removal order.