Learn Amazon FBA

What Is the Inventory Performance Index and Why Does It Matter?

The Inventory Performance Index (IPI) is a metric Amazon uses to assess how efficiently and productively you manage your FBA inventory over time. Your IPI score ranges from 0 to 1000, with higher scores indicating better inventory management. Similar to account health, this score has healthy and unhealthy thresholds.

If your IPI score is above 400, you won’t face limits on storage space in Amazon’s warehouses relative to your current sales volume. However, if your score falls below 400, Amazon will begin to impose restrictions on how much inventory you can store and send in. This can significantly hinder your ability to scale your business. If your score is close to 400, it’s a warning sign that adjustments are needed. Falling below 400 indicates serious inventory issues that require immediate attention.

The IPI system helps Amazon manage its warehouse operations efficiently. Fulfilment centres are designed for fast-moving inventory, not long-term storage. A low IPI score can severely limit your progression as a business, forcing you to sell through existing inventory before you can replenish or send in new stock. Most Amazon sellers typically maintain an IPI score between 600 and 750.

What Contributes to Your IPI Score?

Your IPI score is influenced by several metrics, with four key factors playing a significant role:

• Excess inventory percentage: This is the percentage of FBA units Amazon identifies as excess. It often occurs when you send in too much of a slow-moving or high-BSR item.
• FBA sell-through rate: This is calculated by comparing your average units sold to your average total inventory. A steady sell-through rate shows effective inventory turnover, which Amazon values highly.
• Stranded inventory percentage: This reflects the number of stranded units in your inventory—stock that isn’t available for sale.
• FBA in-stock rate: This measures how well you keep replenish-able products in stock over the last 30 days, weighted by units sold in the last 60 days. It rewards sellers who consistently keep popular items available.

Examples of How Your IPI Score Can Be Affected

Negative Impact: Constantly sending in too much stock, leading to high storage fees, will harm your score. Excess inventory and stranded units (stock stuck in limbo) also negatively affect your performance.

Positive Impact: Sending in appropriate quantities, selling through them in a timely manner, and replenishing consistently will boost your IPI score. This shows that you’re managing inventory effectively and meeting customer demand.

Why Your IPI Score Matters

Amazon’s ideal scenario is for sellers to move inventory quickly and replenish stock regularly. This keeps sales rolling and maximises their profits. As a seller, maintaining a healthy IPI score ensures you can operate without storage restrictions and continue scaling your business efficiently. In essence, Amazon wants you to perform well because your success contributes to their bottom line. By managing your inventory strategically, you can stay on Amazon’s good side while optimising your own profits.

Below, I’ve included a screenshot of my Inventory Performance Index page showing my current score. As you can see, I tend to be a bit lax about removing old products from my inventory or marking them as non replenish-able.

How to Access the Inventory Performance Index Page on Amazon Seller Central

There are two simple ways to find your Inventory Performance Index page:

1. From the Dashboard: On the main dashboard of Amazon Seller Central, you’ll find a widget near the top of the page, next to your total balance. Clicking this widget will take you directly to the Inventory Performance Index page.
2. From the Navigation Menu: Click the three dashed lines in the top-left corner of the page. Navigate to the Inventory section and select FBA Inventory. Once on the FBA Inventory page, hover over Inventory in the top navigation menu and choose Inventory Performance from the dropdown menu.

Using the dashboard widget is the faster method, but it’s always good to know multiple ways to access important tools in Seller Central.

How to Improve Your IPI Score When It’s in the Red

If your IPI score has dropped below the healthy range and is in the red, it’s time to take action. To improve your score, you’ll need to identify and address the most critical issues affecting your metrics. Below, I’ll break down how to tackle each of the four key metrics to help get your score back on track.

To improve both your excess inventory percentage and your FBA sell-through rate, you need to take proactive steps to manage your stock effectively. These two metrics are closely linked, and addressing them often involves the same strategies.

Start by reviewing the items Amazon has flagged as excess inventory. You can find these on the Inventory Performance Dashboard. Scroll down to the “Ways to Improve Your Performance” section and look at the top panel labeled “Excess Inventory Percentage.” On the right-hand side, there is a button labeled “Reduce Excess Inventory.” Clicking this will provide a list of items Amazon has identified as excess.

The goal is to move these units out of Amazon’s warehouses. You can use the following three methods, which also help improve your sell-through rate:

1. Lower the Price: Reducing the price of the item can encourage quicker sales. This approach works well for clearing out slow-moving stock and helps boost your sell-through rate.
2. Sell on Other Platforms: If lowering the price doesn’t work, consider listing the product on another platform, such as eBay, and fulfilling the orders through Amazon’s fulfilment system. This strategy helps you clear excess stock while maintaining a steady sales volume.
3. Create a Removal Order: As a last resort, create a removal order to have the items returned to you. While this option incurs costs, it can prevent long-term storage fees and free up space for faster-moving products.

These same steps also apply to improving your sell-through rate. This metric is calculated based on the average units sold versus the average total inventory over the last 90 days. A healthy sell-through rate ensures that your stock isn’t sitting idle for too long. The key is to sell items before they reach the 60-90 day mark.

Using a repricer tool, like the one offered by Seller ToolKit, can streamline the process of managing both metrics. Repricing tools allow you to set automated rules to adjust pricing as your inventory ages. For example, you can apply more aggressive pricing to older stock, helping it sell faster and improving both your excess inventory percentage and sell-through rate.

By implementing these strategies, you can address excess inventory and maintain a healthy sell-through rate, ultimately improving your IPI score and ensuring a smoother operation of your Amazon business.

Improving your stranded inventory percentage is fairly straightforward. The key is to monitor your inventory regularly and address stranded units as quickly as possible. Units can become stranded for various reasons, and I cover everything you need to know about stranded inventory later in this module. If any of your units become stranded, Amazon will notify you via your Seller Central dashboard or mobile app, so be sure to check these frequently to stay on top of any issues.

Your FBA in-stock rate is all about keeping your fast-selling products available to avoid missing out on potential sales. On the Inventory Performance Index page, you’ll see the total number of lost sales over the past 30 days. Your goal is to keep this number as low as possible. To address any issues, click the “Restock Today” button on the Inventory Performance page. This will take you to a detailed overview of where you’re missing opportunities to restock.

There are two main strategies to improve your in-stock rate:

1. SKU Categorisation
   Many sellers are unaware of the impact SKU categorisation can have on their in-stock rate and overall IPI score. When you’re on the Restock Inventory page —which you can access by clicking “Restock Today”—you’ll see a list of your products. Identify items that are non replenish-able, such as products you sourced as a one-time flip during a Black Friday sale or a limited promotion. For these items, click the drop-down menu on the right-hand side of the product row and select “Customise SKU Settings.” On the customisation page, you’ll find a toggle for “Replenish-able” near the top. Switch this toggle off, and click the update button at the bottom of the page. This action will mark the SKU as non replenish-able, preventing it from impacting your in-stock rate. Regularly categorising SKUs in this way will have a significant positive effect on your IPI score over time.
2. Finding Replenish-able Products
   The second way to improve your in-stock rate is by consistently sourcing replenish-able products for your Amazon store. These are items you can restock and sell repeatedly, forming the backbone of your business. Replenishable products help maintain steady sales and ensure your store remains well-stocked with reliable inventory.

By combining SKU categorisation with a strong focus on sourcing replenish-able products, you’ll be well-equipped to keep your in-stock rate high and improve your IPI score in the long run.