For Amazon sellers, accurate stock preparation has always been a knowledge. IPI is an important benchmark for Amazon to judge the seller’s product sales, identify and punish the seller with slow inventory turnover. If the index fails to reach the threshold, it will directly lead to the seller’s FBA inventory to be bound.

In October of last year (2019), Amazon US implemented a new IPI rule, raising the red line of inventory limit from 350 to 400. If the score check week in the current quarter does not reach 400 points, the next quarter will start to implement the inventory limit.

From January 1, 2020, the inventory exceeding the storage limit shall pay the warehouse excess fee. It is believed that some sellers of American stations have suffered a lot in the first quarter. Today we will give you a systematic explanation of the relevant knowledge about IPI.

What are IPI inventory performance indicators

The IPI index (inventory performance index) is based on the seller’s inventory of hot selling products and the existing inventory management. IPI index score of 1000, more than 400 points means that the index is excellent, if less than 400 points, it means that the seller should take action to improve the score.

Why pay attention to IPI inventory performance indicators

If the seller’s IPI score is too low, there will be two consequences:

1. Unable to create FBA shipment beyond inventory volume limit. For sellers who rely on FBA to deliver goods, it means that they will be stuck in inventory for a whole quarter, which will certainly seriously affect sales.

2. Excessive inventory will be charged a high excess fee. If you are not careful, it is easy to cause huge losses. All the profits from hard-working selling goods have been paid warehousing fees.

Key dates of Amazon IPI evaluation period

Amazon’s IPI assessment starts in the middle of the quarter, about November 19, February 19, May 19 and August 19. If your IPI score is below 350, you will receive a first warning.

Amazon’s IPI assessment will continue until the end of the quarter, ending on the last day of December, March, June and September. If your score falls below 350 again, you will receive an inventory limit notification.

Amazon’s inventory limit will be implemented on the day after the notice is issued, that is, the first day of the new quarter (January 1, April 1, July 1, and October 1). The restriction may not be lifted until the next quarter, that is, three months later.

How to calculate IPI score

Amazon has no algorithm for publishing IPI scores. Just to tell you, you can improve your score by improving the performance of four indicators.

1. Redundant inventory ratio

It refers to the proportion of redundant Library in the total inventory.

The number of days available for supply exceeds 90 days, or at least one item in the inventory is stored for more than 90 days, and the system determines that the cost of continued storage is higher than the cost of other corresponding measures (such as disposal, price reduction, etc.). The FBA inventory in both cases will be judged as redundant inventory by Amazon.

It is easy and necessary to achieve full marks in this indicator.

2. FBA sales rate

The proportion of orders sold through FBA to inventory.

When other data can be done well, but the score still does not exceed 400 points, this indicator is the most critical, and to improve, there needs to be a process.

3. Inventory proportion without information on sale

In the case of limited inventory space, products without sales information will not be allowed to exist. Generally, there will be no information on sale when switching from self distribution to Amazon distribution, so repair the pages of these products in time.

So this is a relatively good standard to maintain.

4. Amazon logistics inventory rate

The general meaning should be interpreted as the proportion of the time when FBA’s goods are available in a month. Each SKU has different weights according to the sales volume in the past 60 days.

If there is no sales or low sales SKUs within 60 days, the relative impact on this score is not as good as the SKUs with high sales but out of stock.

It’s also understandable that Amazon needs to keep all available listing items in stock, so as to avoid the seller’s loss (and Amazon’s loss of course).

It is said that the impact of this indicator on the total score of IPI is not as good as that of the other three indicators. However, if this indicator can achieve full score, the performance of other indicators can be worse, and it may reach more than 400 points.

In general, Amazon’s assessment method is to improve the utilization of the warehouse. This will inevitably increase the seller’s operation difficulty and the extra cost for meeting the standard. FBA sellers need to pay attention to their IPI, understand the calculation method of IPI, and optimize it in time.

If you have a small amount of FBA inventory, but in the off-season sales, you need to weigh whether the excess storage fee is cost-effective if you want to reduce the monthly rental fee to personal sales plan. Don’t let the small lose the big.

Pay attention to check the change of IPI score at any time and plan in advance. Pay attention to the sales rate index and prepare the goods reasonably according to the sales situation. As many batches as possible. Combined with self delivery, reduce the dependence on FBA. Consider reasonable use of multiple accounts to use FBA more flexibly.