Are you an inventory director or in charge of ordering and managing inventory for your company? Managing inventory is a large task for small businesses and large businesses alike. If you do any e-commerce on Amazon, you’re going to want to know about an Inventory Performance Index score.
Do you want to increase your company’s sales, avoid fees and take advantage of limited storage spaces in Fulfillment by Amazon (FBA) warehouses? We’ll tell you what an Inventory Performance Index (IPI) is and some cutting-edge secrets and tips to boost your score.
What Is an Inventory Performance Index Score?
Your company’s Inventory Performance Index score is specific to Amazon.com and measures the health of your inventory in FBA warehouses. It is a number allocated to your business that can fall anywhere between 1 and 1,000. Although Amazon won’t disclose how their IPI score is calculated, there are tips for boosting your IPI score.
Your IPI score is calculated and reviewed by Amazon several times a quarter. It’s assessed each year every March 31, June 30, Sept. 30 and Dec. 31. In addition to those dates, Amazon also calculates IPI six weeks before the end of each quarter. You can negatively impact your IPI score by having too many or too few units in your inventory.
How Is IPI Calculated and What Are the Inventory Performance Index Factors?
Amazon’s IPI score measures a seller’s ability to efficiently manage their inventory in the Amazon network. There are three main factors that affect your Inventory Performance Index.
You may have too much inventory if it’s been in stock for a while, not seeing traffic from buyers, or you bought too much initially. Minimize overstocking to maintain your IPI score and avoid increasing carrying and storage costs, limiting your available Amazon warehouse storage space and accruing fines.
Managing your inventory is important to your business, and it matters to Amazon. If you have too many items that are out of stock or inactive, that isn’t a good sign. If products are in high demand but you aren’t replenishing your inventory, you lose sales, which doesn’t help your IPI score.
On the flip side, having an excess amount of items in your inventory that aren’t being sold for months on end can lead to fines. Amazon measures this factor of your IPI score by determining the percentage of time your items have been in stock during the last 30 days from when they assess your IPI score.
This last factor to calculating your Amazon IPI score considers products that aren’t selling because of listing problems. A listing tool or a lack of meeting Amazon guidelines can cause this problem. You’ll be unable to sell your products to customers, but you’ll still be charged storage fees by FBA.
How Can You Boost Your IPI Score?
With how the score is measured in mind, you’ll want to know ways to boost your Amazon Inventory Performance Index score. The following explains how to boost your IPI score, ensuring you remain in good standing with Amazon and saving you money in the long run.
1. Be Mindful of Your Inventory’s Stock Levels
It’s important not to stock too many or too few items in your inventory. Be sure to comb through your inventory at least once a month. This will remind you of all that you have.
If needed, clean out items that you aren’t selling anymore or are a part of your stranded inventory. That measure is a good practice to have in general, but it will also keep your IPI score in a favorable position. Top-of-the-line inventory management software is a great resource for managing your inventory.
2. Plan in Advance
Planning ahead will cause less stress for you and increase your company’s sales. If you make it a practice to plan ahead by ordering items that are popular during certain times of the year, then you’ll be ready to go when that time rolls around.
Make it a habit to buy items before the holiday season to make sure the biggest time of year goes great. It’s also a good idea to plan ahead for specific seasons. For example, if you know women’s swimsuits are always a hot item in the summer, make sure you have them in your inventory in advance.
3. Adjust the Item Listings That Aren’t Successful
Another great way to boost your IPI score is to regularly adjust the listings of the items that aren’t selling or getting a lot of traffic. If you have an item that’s been in your inventory for a while and not getting any results, there are some tricks you can do to sell it. Here are some small things to tweak that’ll make a huge difference:
- Edit listings
- Add coupons
- Improve keywords
- Advertise listings
- Lower prices
These are a few small adjustments you can make to catch buyer’s attention and convince them to convert. This will lead to more sales and improve your sell-through rate — the number of products you sell with the stock you already have on hand.
4. Review Your Amazon IPI Score Regularly
Even though it seems simple, reviewing your IPI score will save you from stress. We recommend that you assess your IPI score every week. This allows you to catch problems faster, making small revisions regularly so you don’t panic when Amazon’s IPI calculations come around at the end of each quarter.
5. Delete Inactive Items
If you have a large list of inactive items in your inventory and you don’t plan on restocking them, take the time to delete them. It may seem tedious, but it’s an easy way to boost your IPI score. If you have any inactive items, Amazon will assume that you plan on restocking them. If you end up not restocking them or leave them sitting there inactive, it will lower your IPI score.
Why Is Your IPI Score Important?
The “sweet spot” for your IPI Score is 450 and above. If your score remains above 450, you have an unlimited amount of storage space at Amazon’s warehouses. Amazon does this to encourage sellers to sell, rotate or remove unwanted products. Note that Amazon has adjusted that threshold in the past.
You may be wondering why Amazon cares about this since it seems like you are the main person it benefits. However, that’s not quite the case. It’s Amazon’s way to ensure their FBA warehouses don’t become long-term storage facilities. These warehouses are not meant to be storage units, and Amazon makes sure this doesn’t happen by implementing storage limits and making sellers whose scores fall below 450 pay fees.
Putting storage limits and inflicting fees on sellers with a poor IPI score ensures sellers are stocking warehouses with the right products and the correct quantities. Overall, it increases the limited space of Amazon’s warehouse network across the world.
Learn How Finale Inventory Can Help You Boost Your IPI Score
Making sure you have a high Inventory Performance Index score will greatly impact your business and your favorable standing with Amazon. Following the tips of being mindful of your inventory’s stock levels, planning in advance, adjusting item listings, regularly reviewing your IPI score and deleting inactive items will keep your score in a great place.
Another aspect of inventory management is having good software to keep track of all your products. If you want more sales, higher disbursements and faster sales, then learn more about Finale Inventory today. We make inventory management simple and streamlined. Start our free 14-day trial or schedule a demo with us today!