How to improve FBA inventory performance index (IPI)

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The Inventory Performance Index (IPI) is a key metric Amazon uses to evaluate how well you manage your FBA inventory. A high IPI score can increase your restock limits and provide access to more storage, while a low score may result in restrictions and additional fees.

To improve your IPI, you need to focus on four primary factors Amazon evaluates:

  1. Excess Inventory Percentage
  2. Sell-Through Rate
  3. Stranded Inventory Percentage
  4. FBA In-Stock Rate

Here’s a detailed guide to optimizing each of these factors and boosting your IPI score.

1. Understand Your IPI Score

You can find your IPI score in Seller Central under Inventory > Inventory Performance. Amazon calculates this score based on:

  • Your ability to balance inventory levels.
  • Sales velocity and turnover.
  • The degree of unproductive or unsellable stock.

Amazon updates IPI scores weekly, and maintaining a score above 400 (threshold may vary) is critical to avoid penalties or storage restrictions.

2. Reduce Excess Inventory

Excess inventory refers to items that are overstocked or unlikely to sell quickly. A high percentage of excess inventory negatively impacts your IPI.

Strategies to Reduce Excess Inventory:

  1. Run Promotions:
    • Use discounts, coupons, or Amazon’s Lightning Deals to clear excess stock.
    • Consider bundling slow-moving items with faster sellers.
  2. Liquidate Inventory:
    • Use Amazon’s liquidation program to sell off excess inventory at a reduced rate.
    • Alternatively, sell the inventory on other marketplaces or platforms.
  3. Remove Inventory:
    • Create a removal order to return unsold items to your warehouse or dispose of them.
  4. Optimize Replenishment:
    • Use historical sales data and demand forecasting to send only the quantity that can sell within a reasonable timeframe.

3. Increase Your Sell-Through Rate

Sell-through rate is the ratio of units sold and shipped over a given period to the total number of units available at FBA. A low sell-through rate indicates slow-moving inventory.

Tips to Improve Sell-Through Rate:

  1. Optimize Product Listings:
    • Use relevant keywords in titles and descriptions.
    • Add high-quality images and persuasive bullet points to attract buyers.
    • Improve pricing competitiveness with Amazon’s Automated Pricing Tool.
  2. Adjust Pricing Dynamically:
    • Lower prices for slow-moving products temporarily to boost sales.
    • Use third-party repricing tools to stay competitive.
  3. Enhance Advertising Campaigns:
    • Run Amazon Sponsored Ads to increase product visibility and drive sales.
    • Invest in off-Amazon advertising to generate external traffic.
  4. Target Seasonal Demand:
    • Identify products with seasonal spikes and plan promotions around these periods.

4. Resolve Stranded Inventory

Stranded inventory consists of units in Amazon’s fulfillment centers that are not available for sale due to listing errors, price issues, or other restrictions. Stranded inventory not only affects your IPI score but also incurs storage fees without generating revenue.

Steps to Address Stranded Inventory:

  1. Monitor Stranded Listings:
    • Check the Fix Stranded Inventory tool in Seller Central to identify affected SKUs.
    • Resolve issues by updating listings, correcting pricing, or addressing account issues.
  2. Remove Unsellable Items:
    • Create a removal order for inventory that cannot be resolved.
  3. Automate Stranded Inventory Checks:
    • Set up automatic notifications for stranded inventory issues to ensure quick resolution.

5. Maintain a High FBA In-Stock Rate

The in-stock rate measures how well you keep your top-selling products available for purchase. A low in-stock rate can lead to missed sales opportunities and negatively impact your IPI.

Strategies to Maintain Stock Levels:

  1. Monitor Inventory Levels:
    • Use the Restock Inventory tool in Seller Central to identify when to replenish stock.
    • Set up alerts for low-stock items to prevent stockouts.
  2. Leverage Inventory Forecasting:
    • Analyze sales trends to estimate future demand accurately.
    • Adjust replenishment schedules for seasonal spikes or promotional events.
  3. Diversify Supply Chains:
    • Partner with multiple suppliers to reduce lead times and avoid disruptions.
  4. Send Smaller, More Frequent Shipments:
    • This approach ensures consistent stock availability while staying within restock limits.

6. Remove Aged Inventory

Aged inventory (stock that has been in Amazon’s fulfillment centers for over 90 days) not only affects your IPI but also incurs long-term storage fees.

Actions to Manage Aged Inventory:

  1. Identify Aging Stock:
    • Use the FBA Inventory Age report in Seller Central to pinpoint old inventory.
  2. Implement a Sell-Through Strategy:
    • Use discounts, bundles, or promotions to move aged inventory quickly.
  3. Set Up Automatic Removal:
    • In Seller Central, enable automatic removal of inventory that reaches a specific age threshold to avoid long-term fees.

7. Use Amazon’s Tools for Inventory Management

Amazon offers several tools to help sellers manage inventory and improve their IPI score:

  1. Inventory Performance Dashboard:
    • Monitor IPI metrics and get actionable insights to improve your score.
  2. Restock Inventory Tool:
    • Receive recommendations on restock quantities and timing.
  3. FBA Inventory Age Report:
    • Identify slow-moving and aged inventory.
  4. Fix Stranded Inventory Tool:
    • Resolve stranded listings efficiently.

8. Avoid Common Pitfalls

Overstocking:

  • Sending excessive inventory leads to higher storage fees and lower IPI scores.
  • Stick to demand-based replenishment planning.

Understocking:

  • Frequent stockouts result in missed sales opportunities and harm your FBA in-stock rate.
  • Balance between sending too much and too little.

Ignoring Seasonal Trends:

  • Failure to adjust inventory levels for seasonal demand fluctuations can result in lost sales or excess stock.
  • Plan ahead for holidays and peak sales periods.

9. Continuously Monitor Your Progress

Improving your IPI score requires consistent monitoring and adjustments. Set aside time weekly to review your inventory performance metrics, address any issues, and plan ahead for changes in demand.

10. Benefits of a High IPI Score

  1. Increased restock limits, allowing you to scale your business.
  2. Better utilization of Amazon’s storage facilities.
  3. Reduced long-term storage fees due to optimized inventory turnover.
  4. Improved overall profitability and business sustainability.

Conclusion

Improving your FBA Inventory Performance Index (IPI) score involves a combination of proactive inventory management, sales optimization, and strategic decision-making. By reducing excess inventory, boosting your sell-through rate, resolving stranded listings, and maintaining high in-stock rates, you can enhance your IPI score and unlock the full potential of Amazon FBA. Regularly monitoring and adjusting your practices will ensure long-term success in the competitive marketplace.

Categories: Digital Marketing