What if the storage capacity is limited?Detailed explanation of Amazon IPI indicators to help you sell well in peak season
Storage capacity has always been a very core point of doing Amazon's business. The size of storage capacity basically determines the speed of business growth, and storage capacity is a point that many sellers seem to be very uncontrollable. Now it is approaching the peak season of the fourth quarter. The situation of the limited storage capacity of the small partners is very serious and even the goods cannot be shipped. In fact, the size of the storage capacity has a very direct relationship with Amazon’s IPI index. In the same environment at the same time, sellers with higher IPI usually get relatively more storage capacity, so in essence, the level of IPI determines the speed of business development. , so it is crucial to understand what IPI is and what factors affect IPI scores.
1. What is Amazon IPI ?
Amazon IPI is a measure of inventory health and it is rated as a number between 0-1000 . It SKUs monitor low and excess inventory levels for SKUs. Amazon IPI is an initiative that enables sellers to effectively monitor Amazon inventory. Amazon IPI measures your inventory status, which is when a seller has few or enough items in stock on Amazon. For sellers, having too few SKUs can lead to out-of-stocks and ultimately lost sales. Conversely, excess inventory can lead to increased warehousing costs.
Amazon's IPI is designed to benefit both sellers and Amazon. Optimized inventory reduces lost sales and the cost of holding inventory for sellers. This will also help Amazon ensure that sellers have the right products in the right quantities in their warehouses, ensuring that Amazon’s network of warehouses is being used efficiently.
An Amazon IPI score above 500 indicates that your business is performing well and has sufficient inventory. In contrast, an IPI score below 400 is problematic and requires immediate action to improve the score. Amazon imposes storage capacity restrictions on sellers whose IPI is lower than the minimum requirement. However, sellers who maintain an IPI score of 500 or higher will have unlimited storage space.
2. Amazon's Inventory Performance Dashboard
Amazon's Inventory Performance Dashboard helps you identify opportunities to increase sales, reduce costs, and track key performance indicators. The IPI panel also has a display performance bar for each of the four elements:
3. Four Elements That Affect Your Amazon IPI
1. Redundant Inventory Percentage
Items are considered redundant if they are available for more than 90 days based on forecast demand. Therefore, you should keep track of your excess inventory percentage. Three metrics related to excess inventory percentage are displayed on the Amazon Inventory Performance Dashboard:
a. [Redundant Item Quantity] refers to the quantity of items that would cost more without taking any action and paying storage fees than taking action (such as lowering prices or removing inventory). This value depends on the buyer's demand for the item and the item's cost (including fees and item cost).
b. [Total estimated storage cost] refers to the total estimated cost that may be incurred if you do not take any measures within 3 years and only leave the inventory idle in the operation center. These include monthly inventory storage fees and long-term storage fees.
c. [Reduce redundant inventory] button can display the number of SKUs you have redundant inventory. Click this button to go to Manage Inventory Status and take action on the relevant inventory.
2. Percentage of Amazon inventory that is not available for sale
Inventory that is unavailable to buyers due to issues with product information can result in lower sales and storage costs. This type of inventory is called "unavailable Amazon inventory." The percentage of Amazon inventory that is not available for sale is measured by calculating the percentage of FBA inventory items that are not currently available to shoppers on Amazon. The Inventory Performance Dashboard also displays two metrics related to the percentage of Amazon inventory that is not available for sale:
a. [Quantity of Amazon Inventory Items with No Information for Sale] refers to the total number of items that are in stock in the fulfillment center but have no information for sale.
b. The [Repair Product Information] button can display how many SKUs are in stock in the fulfillment center but have no information on sale. Click the button to go to Fix Amazon Inventory that is not available for sale.
3. FBA sell-through rate
If you can maintain a FBA sell-through rate for 90 consecutive days, you can maintain a proper balance in your inventory. This FBA sell-through rate is calculated by dividing the number of units shipped in the past 90 days by the average number of units available for sale in the fulfillment center during that time period. Two metrics related to FBA sell-through rates are also displayed on the Inventory Performance dashboard:
a. [Number of items sold (last 90 days)] refers to the total number of FBA items sold and delivered within the past 90 days.
b. The [Increase sell rate] button will display the number of ASINs that have the opportunity to increase the sell rate. Click this button to go to Manage Inventory for recommendations.
4. FBA in-stock rate
Keeping restockable top sellers in stock helps maximize sales. To track performance in this category use FBA In-Stock Rate, which is the percentage of time that restockable FBA ASINs were in stock in the past 30 days, per SKU sold in the past 60 days Commodity quantity calculation.
You can indicate that a SKU is not available for replenishment in Replenishment Inventory by going to the drop-down menu in the Actions column and selecting Hide Suggestions. Hiding all SKUs associated with an ASIN will exclude that ASIN from your FBA in-stock rate calculations and FBA Estimated Lost Sales. There are also two related metrics displayed on the Inventory Performance Dashboard under Replenishable FBA In-Stock Percentage:
a. [Estimated FBA Loss in Last 30 Days], which can be calculated by multiplying the estimated product sales during the out-of-stock period by the average selling price.
b. The [Replenish Now] button shows how many SKUs are available for days shorter than the stocking time. This means that expedited restocking may be required to avoid stock-outs.
4. Major Factors Affecting Your Amazon IPI Score
Amazon's IPI is a measure of your Amazon inventory performance cycle. The IPI score measures your efficiency in managing your Amazon (FBA) inventory fulfillment. There are several factors that will affect your IPI score, of course the most important one depends on your ability to execute:
a. Inventory levels should be balanced between sold and available inventory and avoid overstocking, i.e. ensure effective Amazon inventory management.
b. Make sure you don’t pay long-term storage fees due to excess inventory or poor sales, i.e. ensure good Amazon inventory performance.
c. Fix all product information problems.
d. Keep best-selling items at appropriate levels of inventory wherever possible to meet buyer demand and maximize customer satisfaction.
5. How to Improve Your Amazon IPI Score
Four factors can improve a seller's Amazon IPI score:
1. Manage product inventory without information on sale
The first way to achieve a higher Amazon IPI score is to manage product inventory that is not available for sale. Unavailable product inventory is inventory of unsold items stored in FBA warehouses, and it can negatively impact your IPI score. To fix this problem it can be re-fixed or removed.
2. Eliminate redundant inventory
Redundant inventory is when you store more inventory in a fulfillment center than you should, usually when you exceed the forecast demand for a product. This situation can be resolved by clearing or removing. Note that there is also a fee for removing or returning inventory to your warehouse. Improving your Amazon IPI score allows you to keep fast-selling products in stock, so weeding out slow-selling products is a must. Consider the best options before making a decision.
3. Increase sell-through rate
The sell-through rate is the ratio of a product's sold inventory to the average amount of available inventory in the FBA warehouse, calculated continuously over the past 90 days. The sell-through rate can be improved by increasing sales. Sales growth is usually achieved by optimizing your listings and ads. A good listing is crucial to increasing your sales. Good copy and images etc. can help you increase traffic and increase lead conversion rate and improve your IPI .
4. Maintain healthy inventory levels
You can perform better on Amazon's inventory metrics simply by maintaining healthy inventory. You may realize that out of stock is inevitable, but you need to reduce out-of-stock situations as much as possible. A good Amazon inventory management method to prevent out-of-stock is to establish a safety stock number, which is required when it is lower than the safety stock value. Restock immediately. And this safety stock can be placed in the FBA warehouse or in the satellite warehouse, and even both are prepared for double insurance.
6. Amazon IPI FAQ
1. Q: Why is my recent sales up but my IPI score down?
A: The IPI Score combines the past three months of sales, inventory levels and expense costs into a rolling indicator that is updated every week. Typically, when sales improve, metrics should move in the right direction. However, the score of this indicator is not only guided by sales, but also determined by many influencing factors, such as the level of inventory in stock, so the index can be improved by optimizing one by one with the four influencing factors as the only guideline.
Also, since the indicator is a weekly rolling indicator, it will not be displayed immediately. For example, if your sales improved last week, your IPI may not change immediately because it's only one week out of three months that affects your score. However, by maintaining a good to excellent influencer on a daily basis, you should see your IPI score improve over time.
2. Q: How is the Amazon Logistics in-stock rate calculated?
A: The FBA in-stock rate is the percentage of time that restockable FBA products were in stock in the past 30 days, weighted by the number of units sold in the past 60 days.
3. Q: What are the consequences of not reaching the target score?
A: There are many reasons to maintain a healthy inventory other than an IPI score. When you control your inventory more effectively, it's easier to increase sales, find ways to reduce costs, and generally improve profitability. Sellers who fail to reach the minimum IPI score stipulated by Amazon will not only suffer from poor business development, but also Amazon will limit their storage capacity and may pay various related storage fees and additional fees.
A large part of the success of Amazon's business is due to the seller's IPI score, or in other words, the optimization of IPI is the optimization of the overall healthy development of the business. Factor IPI monitors almost all indicators of the healthy development of Amazon's business, and IPI is good. Then the business development must be very good. To improve Amazon’s IPI score, the Amazon Inventory Dashboard should be regularly surveyed to prevent potential lost sales and fully implement any recommendations Amazon provides.