Several weeks ago Amazon sent all sellers an email regarding the status of their IPI score and its implications. First, you might have noticed that there is an increase in the IPI threshold from a score of 350-400 to now 500 and above to those who will not be subjected to a storage volume limit for the coming quarter starting September until December 2020.
What is Amazon IPI Score?
IPI (Inventory Performance Index) Score is a metric based on how well you drive sales by stocking popular products and efficiently managing on-hand inventory.
This is Amazon’s way of setting the standards for inventory performance. The IPI score ranges from 0 to 1000. According to the latest Advisory from Amazon to sellers, the IPI score 500 and above is an indicator that you are doing well and any score below 500 is an indicator that there is an issue in your amazon selling and it needs to be fixed.
As a benefit for those who scored 500 and higher, Amazon will not subject the seller to storage volume limits. While those who scored below 500 will be subjected to storage volume limits. These limits are applied every succeeding quarter.
How Do You Increase IPI Score?
While Amazon did not disclose how they calculate for the IPI score there are some indicators on how you can improve your IPI score.
Since IPI score is based mainly on the inventory and it is directly correlated with storage in Amazon warehouses here are the factors that can affect your IPI Score.
- Excessive Inventory
- Stranded Inventory
- Sell-Through
- In-Stock Inventory
Excessive Inventory
Amazon defines excessive inventory based on the following criteria
- There is at least one unit in your inventory that is more than 90 days old.
- Product has more than 90 days of supply
- The cost of holding your inventory without actions is higher than the cost when action is taken. This happens when you lower your prices to increase sell-through or when you remove surplus inventory.
What to do to avoid Excessive Inventory?
Since Excessive inventory is determined mostly by the length of time that your inventory is in storage, it is best to maintain products or units good only for 30-60 days.
Another good practice is to monitor your inventory age to ensure that you will not be subjected to any long-term storage fees.
In-stock Inventory
This refers to the percentage of time that your inventory is in stock for a period of 30 days divided by the number of SKU units sold for a period of 60 days. According to Amazon, however, the In-Stock Inventory rate does not play a role indirectly influencing the IPI score.
Stranded Inventory
Stranded inventory refers to the units that are in the fulfillment centers however the listings are incomplete, missing, or inactive. As a result, these units are taking up space at fulfillment centers but the products can’t be sold.
Sell-Through
The Sell-through or sell-through rate is calculated by the number of units sold within the 90-day period divided by the average number of units available at the fulfillment center during the same 90-day time period.
To help increase your sell-through rate, it is best to make sure that your inventory is regularly monitored. Remove inactive listings, complete the information required for listings with incomplete data, and add missing listings. By following best practices in monitoring your Amazon inventory, you are also increasing your IPI Score.
Conclusion
While the IPI Score and how it is calculated is not disclosed by Amazon, following best practices in the upkeep of your inventory will surely help you in increasing your IPI Score. Regular monitoring of your unit inventory and taking action on it will definitely help in the increase or maintenance of a good IPI score to prevent any penalties from Amazon.
