When Amazon sellers are evaluated for inventory performance, they’re graded on the Inventory Performance Index metric. As a Amazon seller you need to monitor metrics and correct problems to improve your scores.
The secret to success as an Amazon seller is understanding inventory management techniques that can reduce storage costs and increase profitability and overall efficiency.
You might be a tech-savvy individual with an ear to the ground for all things Amazon. But if you’re not, don’t worry. This blog will explain how AMAZON INVENTORY PERFORMANCE DASHBOARD works in layman’s terms so that you can understand it and see what it does for your business.
DEFENATION OF AMAZON INVENTORY PERFORMANCE INDEX
If you sell on Amazon, it’s important to keep an eye on your IPI (Amazon Inventory Performance Index). This index is designed to help sellers maximize space in FBA warehouses and reduce storage costs. The IPI displays a number from 0-1000, and anything over 450 indicates a “good” number.
The IPI is a machine learning technique that categorizes individual SKUs. Amazon trains the machine learning algorithm based on their data, including a seller’s historical inventory performance.
This index can help you identify and correct listing issues and improve the overall sales of your products.
You can also use the IPI to see if you have too much or too little of any given product in the Amazon FBA warehouse to make changes accordingly.
AMAZON INVENTORY PERFORMANCE DASHBOARD
Amazon Inventory Performance Index (IPI) measures how efficiently sellers manage their space and Inventory in Amazon’s FBA warehouse.
Amazon Inventory Performance Dashboard is an excellent way to view all of your Amazon inventory data in one place. It provides a snapshot of the health and performance of your listings, including sales rank, average unit price, number of units available, and more.
By looking at this information together, you can analyze which products are performing well and which ones need some attention.
WHAT ARE THE COMPONENTS OF IPI, AND HOW DO THEY AFFECT YOUR INVENTORY’S PERFORMANCE ON AMAZON?
1: Excess Inventory Percentage
Do you know the consequences of being in Fulfillment by Amazon Store for too long?
Excessive Inventory refers to the items stored for a more extended time than anticipated because the customer demand remains low. It creates more Amazon storage fees, reducing your cash flow and profit margin.
Have you ever dealt with the situation where your next shipment arrives at a fulfillment center before the previous one leaves? These are manifested as overstock situations. Delays in shipping increase storage fees and holding costs for slow-moving FBA inventory.
You need a strategy to deal with your surplus inventory so your performance index may not be affected.
Effects of Removing Excessive Inventory
Exercising control over your excess Inventory will have many positive effects on the general operations of your business.
- Reduces storage fees,
- Provides more space to store higher-selling products that are lower in cost per unit, and
- Increases visibility due to improved ranking of your product listings.
2: FBA Sell-Through Rate
Before digging into deep what is FBA sell-through rate, we will discuss what FBA is?
What is FBA?
FBA stands for “Fulfillment by Amazon (FBA) refers to a fulfillment service provided by the online retailer Amazon.” This means that when your product sells on Amazon, they’ll handle all of the shipping logistics for you and replace any damaged products with new ones as needed.
FBA Sell Through Rate; Defined
The FBA sell-through rate calculates the number of units sold and shipped over 90 days, divided by average inventory levels. It measures how efficiently you balance your sales and in-house FBA inventory.
Improving sell-through rates
- Make sure that you have a competitive price
- Ensure you improve on your products before listing them on Amazon
- Add more keywords to your listing, so it appears in more searches
- Include an image with every single item you sell on FBA
- Ensure that you have enough Inventory for any potential surge in demand
3: Stranded Inventory Percentage
When inaccurate listing errors result in no orders for a product, it’s often referred to as “stranded merchandise.”
Your Stranded Inventory Percentage measures how many units have been left unsold at some point- As the number of stranded goods goes up, so does your losses.
How to Fix It?
Go to your Dashboard and click the Fix listings button to help you analyze and fix the stranded goods issues.
- Review all your current listings with limited quantity (not unlimited).
- List the items again to release the binding quantity.
- Use any unsold inventory to your advantage
- Eliminate the need for excess inventory, which drives up costs
IPI THRESHOLDS UPDATED BY AMAZON
According to a recent update released by Amazon, sellers who maintain the FBA Inventory performance index score above 450 will be able to keep their unlimited storage space. If the FBA performance index is below 450, sellers won’t have access to that space for future quarters.
Amazon offers a storage space “score” for its FBA sellers based on the level of their IPI score. The lower your IPI is, the less room you’ll have in Amazon’s warehouses to store goods.
STRATEGIES TO IMPROVE YOUR AIPI SCORE
To enforce your inventory limits and manage the performance of Amazon sellers, Amazon performs regular Inventory Performance Index checks.
There are two IPI checks every three months. Any seller who fails in these checks cannot ship any more inventory to FBA for the next quarter. Here are some strategies to improve your IP score.
Make sure you have enough stock on hand to meet customer demand
To improve your inventory performance index score on Amazon, you need to make sure that you have enough stock at all times. This will help ensure the customers’ satisfaction and high ranking on the marketplace.
To be a successful seller on Amazon, you need to maintain a healthy inventory level. This way, you can avoid situations where customers are ordering items and not getting them according to their demands.
Improve your sell-through rate
Do you want your Amazon inventory performance score to go up? One way is by improving the sell-through rate of what’s in stock. Sell more items for higher profits with this simple trick.
The Sell-Through Rate is typically calculated as sales divided by Inventory on hand. It’s essential for any seller who wants to keep up with demand without constantly running out or having too much stock lying around taking up warehouse space.
Remove Excess Inventory
This is the best way to improve your inventory performance index score on Amazon.
The key is to remove excess Inventory from the FBA store and optimize what left with standard operating procedures like ensuring all product information has been entered correctly onto each unit.
Hence, there are no discrepancies when customers purchase items.
Optimize your listings to improve visibility and increase sales conversion rate
If you want to improve your inventory performance index score, you must optimize and enhance the quality of your listings.
With the proper optimization and visibility, your Inventory can be more profitable.
The best method to improve visibility and increase sales conversion rate is by listing items with high-quality photos that accurately reflect what they are selling (instead of using stock images). Hence, customers know strictly what will come in the package before making the purchase.
BENEFITS OF HAVING A HIGH AIPI SCORE
Amazon’s Inventory Performance Index (IPI) allows both Amazon and the sellers to earn profit and growth-oriented experience.
Amazon helps sellers by ensuring that space is available and guarantees that sellers are storing the right products in sufficient quantities.
On the other hand, sellers enjoy the perks of spacious space in Amazon’s warehouse, reduced cost, hassle-free quick packaging and shipping, and the integrity of the successful and reliable world’s largest online shopping store.
FREQUENTLY ASKED QUESTION
Do new ASINs affect my IPI score?
Nix, new ASINS are tolerated till 90 days period ends in the FBA store. After launching a new product, you have 90 days to generate sales. If the demand is not there within this period and your products do not sell quickly enough, they will not impact your IPI score.
What worst thing can happen to you if your IPI score falls below?
The storage capacity at Amazon’s warehouses is not unlimited. Amazon is putting a new limit on the amount of storage space you can use for your products. As long as IPI remains over 450, sellers can store unlimited items.
However, if it falls below that number, Amazon will give six weeks’ notice before implementing storage limits.
How to Check Your Amazon Inventory Performance Index?
Amazon inventory performance index measures how well you are meeting customer demand. It is calculated by looking at your inventory turnover rate and average sales daily.
- You can check the Inventory tab in Seller Central or the dashboard widget.
- Check for issues like high backorders, slow-moving items, or out-of-stock items that may affect your Amazon IPI score.
- Use this information to make changes and improve performance to keep growing as an e-commerce seller.
- Contact us if you need help with checking and improving your IPI score.
Amazon is the biggest online shopping store, and to maintain its success, it needs to ensure that customers find whatever they need and that you, as a seller, are not paying high FBA warehouse costs.
It also ensures that the limited space of the amazon warehouse is used by sellers efficiently.
We have covered the factors influencing the Amazon inventory Performance Index and the strategies that ensure a win-win situation for the sellers and Amazon.