For a lot of experienced Amazon sellers inventory limit restrictions are one of the most frustrating things on Amazon. As an FBA seller, you send your stock to Amazon and they will store your stock in their warehouses and ship all your orders. Inventory limit restrictions are where Amazon limits how much inventory you can send in. They limit it to a certain number of units or total storage volume in Cubic Feet.
One of the most significant factors in increasing inventory limits is your IPI score (Inventory Performance Index.) The IPI score is Amazon's reference for how well your inventory performs. The lower your IPI score, the less storage space Amazon will assign to your account! Improving your IPI score will also decrease the amount of FBA storage fees you will need to pay. One important way to increase your IPI score is to sell your FBA inventory faster. You could move your stock at a faster rate by running discounts, creating coupons, increasing your ad spend and many other methods.
Where Can I See My IPI Score?
The simplest place to see your IPI Score is in the Key Metrics section of the Seller Central dashboard. This will just give you the number of your IPI Score for each marketplace but no additional information. From here you can go to your IPI dashboard to see more information.
Another place to navigate to your IPI score is in the "Inventory Performance" page of "FBA Inventory." This shows a bar with your IPI score, as well as a bar for your performance in each of the 4 top influencing factors, allowing you to see which factors you need to focus on improving.
If you're a new seller, you won't have an IPI score. You usually only get an IPI score about 15 weeks after you send your first item into Amazon FBA.
What is a Good IPI Score?
Your IPI score can range from 0-1000. The minimum you’ll want your IPI score to be is 400 points. If you drop below this number, you will be hit with significant inventory restrictions, limiting how much stock you can send into Amazon’s warehouses. Your goal will be to try to raise your IPI score to between 600 and 1000 points, as this is considered a good score.
Main Factors Affecting Your IPI Score
Amazon gives you 4 top influencing factors in the Inventory performance page of seller central. These are:
Excess inventory percentage
FBA sell-through
Stranded inventory percentage
FBA in-stock rate
Excess Inventory Percentage
Excess inventory is inventory that sits around in Amazon’s fulfillment centers without being sold. Having inventory sitting around in an FBA center will lower your IPI score as well as increasing your total storage cost, so it is essential that you work at improving this.
Amazon divides the Excess inventory percentage into 4 groups; poor, fair, good, and excellent. Your goal obviously is to try get your score to excellent.
How to improve your Excess inventory percentage: To improve your Excess inventory percentage, you basically need to make sure that you are sending in the right amount of each product with every shipment.
You want to send enough that you don’t lose out on sales because you don’t have the stock, but also don’t send too much that you have more supply than there is demand for your product. This requires forecasting how your inventory sells and analyzing seasonal fluctuations from previous years.
Once you have found that sweet spot of the right amount of inventory required, you should minimize the amount of stock that sits around for too long. If you do end up with more inventory than needed, you will have to run coupons and deals to get that inventory sold so that it doesn’t affect your IPI. Other ways to move excess inventory are to run ads or just liquidate the inventory.
Amazon allows you to check on your “Estimated excess units” in the ‘FBA Inventory’ page. Amazon’s definition for Estimated excess units is “Estimated excess are units for which we forecast that it will likely cost you more to keep in stock and pay storage costs than to reduce by advertising, liquidating, or removing.”
FBA Sell-Through
Your FBA sell-through rate is possibly the most important factor of your Amazon IPI score. It is the rate at which you can sell through your stock in Amazon’s FBA warehouses. Higher sales = a higher “Sell-through rate.” Your STR is the total number of units shipped in the past 90 days divided by the average number of units in your FBA inventory over the same period.
There are 3 groups that your STR can fall into; poor, excellent and fair. Your goal is to ensure that your STR is not too low that you always have excess inventory, but also not too high for you to need more products in FBA.
How to improve your FBA Sell-Through: To increase your STR, you need to ensure that you have as many orders going out each month as shipments going in. To improve this you can SEO optimize your listings, improve your listings graphics, create high-quality A+ content, run PPC campaigns and run coupons and deals when needed.
Another effective way to keep your STR in balance is to send the right amount of inventory into FBA with each shipment. If you are sending in too much stock, you may struggle to make enough sales to clear all of this, eventually harming your STR.
Improving your STR will in effect lower your excess inventory at the same time. So optimize this to improve 2 of the most important factors in your IPI score.
Stranded Inventory Percentage
Stranded Inventory is any inventory that cannot be sold due to an inactive listing or listing suppression. This could be caused by:
Inaccurate or incomplete information for the product
Pricing too high or low
Selling items that violate Amazon’s policies
Issues in shipping and handling
Poor inventory management leading to stock that isn’t replenished on time
When a product becomes stranded, you will need to do what you can as soon as possible to get it live again so that you don’t lose out on too many sales and to keep your IPI score from being affected.
How to Fix Stranded Inventory: There are a couple of solutions here, but generally, you would create a removal order for the stranded inventory or appeal the listing suppression to reinstate it so the inventory becomes available for sale.
If you are faced with persistent issues, then you can contact Amazon support for assistance on how to resolve these problems.
FBA In-Stock Rate
Your “In-Stock Rate” is how many FBA SKUs in your catalog have inventory in Amazon warehouses. A good rate is over 90%. By keeping your popular products consistently in stock you ensure that you are not missing out on crucial sales each month.
How to optimize your FBA In-Stock Rate: Amazon always has a recommended replenishment quantity, which can vary wildly; therefore, calculating how much inventory you need for a specific SKU yourself is best. We recommend taking the previous 30 days' sales, increasing that by 15%, and sending in that amount. That allows you to cover the expected sales while considering potential growth.
Always remember the time of year if you are selling a seasonal product. Based on the time of year, sales will increase or decrease. It will be fairly easy to predict when your sales will go up or down, but you will need to determine by how much.
Final Thoughts
It is unknown whether there are any other factors that influence your IPI Score as Amazon does not share this information publicly, apart from the four factors listed above. They have clearly mentioned though that “IPI points are not deducted for running out of stock.”
In Amazon’s own words, “The best way to increase your IPI score and minimize your FBA storage fees is to reduce unproductive inventory and keep your product inventory at lean levels while ensuring you have enough on hand to minimize lost sales.”
Keep on top of these things, and your IPI score will quickly increase and you won’t need to worry about inventory limits and other struggles.
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