Managing inventory on Amazon goes beyond simply keeping products in stock. The real challenge is ensuring inventory moves efficiently while staying within Amazon’s guidelines. That’s where the Inventory Performance Index (IPI) score comes into play.
This score determines how much FBA storage space Amazon allocates to a seller. A low IPI score can result in storage limits, increased fees, and restrictions on sending in more inventory. If not managed carefully, these setbacks can disrupt supply chains, increase costs, and limit growth opportunities.
Understanding how the IPI score works—and knowing how to optimize it—can make a significant difference in maintaining a smooth and profitable Amazon operation. Let’s break down what the IPI score means, why it matters, and how to improve it.
What is Amazon’s IPI Score?
Amazon’s IPI score is a numerical representation of how efficiently you manage your FBA inventory. The score ranges from 0 to 1,000. While Amazon doesn’t disclose the exact formula behind it, we do know that four main factors influence your score:
- Excess inventory levels – Too much stock sitting in FBA without selling can drag your score down. Amazon wants you to keep things moving.
- Sell-through rate – If your products are selling quickly relative to your inventory levels, it signals efficiency.
- Stranded inventory – Listings that are inactive due to issues like pricing errors or policy violations count against you.
- In-stock inventory levels – Running out of stock too often can negatively impact your score since Amazon wants sellers to maintain consistent availability.
Amazon often adjusts the minimum IPI threshold that sellers must meet to avoid storage restrictions. In the past, this number has hovered around 400, but it’s subject to change. If your score falls below the threshold, Amazon can limit your FBA storage space, force you to remove excess inventory, or increase your storage fees.
For established brands on Amazon, inventory efficiency is everything. A poor IPI score isn’t just a minor inconvenience. It can create serious operational and financial challenges. If your score drops below Amazon’s threshold, the consequences can ripple across your entire business, from fulfillment to profitability.
Why Your Amazon IPI Score Matters
1. Amazon Can Limit Your Storage Space
One of the most immediate consequences of a low IPI score is FBA storage restrictions. Amazon has a finite amount of warehouse space, and it prioritizes sellers who manage their inventory efficiently. If your IPI score falls too low, Amazon may limit how much inventory you can send to FBA, regardless of how high your sales volume is.
For brands that rely heavily on FBA to fulfill orders, this can be a huge setback. Imagine a best-selling SKU that you know will perform well during Prime Day or Q4. If Amazon caps your storage limits, you might not be able to send in enough inventory to meet demand. As a result, you could miss out on significant sales revenue.
Many brands have learned this the hard way, especially in recent years as Amazon has tightened storage limits for underperforming inventory. In the worst-case scenario, you are left scrambling for alternative fulfillment solutions at the last minute. This can be both costly and inefficient.
2. A Low IPI Score Leads to Higher Storage Fees
Amazon’s FBA storage fees are already a significant cost, but they become even more expensive when your IPI score drops. Amazon penalizes brands with excess inventory by charging long-term storage fees on slow-moving products.
Let’s say you have thousands of units of a product sitting in Amazon’s warehouses that aren’t selling quickly enough. Over time, those units rack up higher storage costs, cutting into your margins. The longer they sit, the more expensive it gets. Eventually, you may be forced to either heavily discount the product to move it quickly or pay for removals or liquidations—all of which impact profitability.
For brands with large catalogs, excess inventory can quietly drain thousands of dollars from the bottom line each month. Keeping an eye on your IPI score and proactively adjusting your inventory strategy are essential to avoid these unnecessary costs.
3. Stockouts Hurt Your IPI (and Your Sales)
While excess inventory is a problem, stockouts can be just as damaging. If your products go out of stock frequently, your IPI score can take a hit. Amazon rewards brands that maintain consistent availability because it improves the shopping experience for customers.
But the real danger of stockouts goes beyond the IPI score. Running out of stock disrupts your organic ranking on Amazon. When a product is unavailable, it stops generating sales and loses momentum in Amazon’s algorithm. Even after restocking, you may find that your product has dropped in search rankings, requiring additional advertising spend to regain visibility.
For brands that operate at scale, stockouts can be a logistical nightmare. If one of your best-sellers suddenly becomes unavailable due to poor inventory forecasting or FBA storage limits, you risk losing market share to competitors.
4. Poor Inventory Management Disrupts Your Entire Supply Chain
When your IPI score drops, the problems don’t stop at Amazon. A weak inventory strategy can create bottlenecks across your entire supply chain, affecting everything from manufacturing to distribution.
For example, if Amazon limits your FBA storage, but you’ve already placed a large production order with your supplier, you could end up with too much inventory and nowhere to store it. This can lead to increased warehousing costs, slower cash flow, and potential delays in launching new products.
On the other hand, if you underestimate demand and don’t send enough inventory to Amazon, you could experience stockouts at a critical sales period. This could force you to air freight emergency shipments—an expensive move that can decimate profit margins.
The most successful brands don’t just track their IPI score. They integrate inventory performance into their larger supply chain strategy. That means forecasting demand accurately, managing lead times with suppliers, and ensuring they have a flexible fulfillment plan that can handle unexpected changes.
How to Improve Your IPI Score
Improving your IPI score requires a proactive and ongoing approach to inventory management. Since Amazon evaluates your inventory performance regularly, keeping your score high means staying ahead of potential issues before they impact your storage limits or increase costs.
Here’s how to optimize each factor that affects your IPI score:
1. Reduce Excess Inventory
Amazon penalizes brands that let too much unsold inventory sit in its warehouses. If your Excess Inventory percentage is high, you’ll need to take action to avoid storage restrictions and unnecessary fees.
Strategies to Clear Excess Inventory Efficiently:
- Run discounts and promotions: Offer limited-time price reductions, use Lightning Deals, or enroll in Amazon Outlet to move aging inventory faster.
- Bundle slow-moving SKUs with top sellers: This increases sales velocity while reducing excess stock.
- Leverage Amazon Advertising: If a product isn’t selling, it may need more visibility. Invest in Sponsored Product Ads or Display Ads to drive traffic.
- Liquidate or remove inventory: If a product isn’t selling despite efforts to promote it, consider creating a removal order or using Amazon’s liquidation program to recover some costs.
You should also analyze historical sales data and seasonal trends to avoid overstocking in the first place. Demand planning tools and AI-driven forecasting solutions can help brands make smarter inventory decisions.
2. Increase Your Sell-Through Rate
Amazon calculates your sell-through rate by dividing your total FBA unit sales over the past 90 days by your average inventory level. A low sell-through rate suggests that products are sitting in FBA too long, which can hurt your IPI score.
Ways to Improve Sell-Through Rate:
- Optimize product listings: Ensure your titles, bullet points, descriptions, and images are fully optimized to improve conversion rates.
- Adjust pricing dynamically: Use Amazon’s Automated Pricing tool or third-party repricing software to stay competitive without devaluing your brand.
- Launch strategic promotions: Use Coupons, Buy One, Get One (BOGO) deals, and Subscribe & Save to encourage repeat purchases.
- Expand into new advertising strategies: Invest in Amazon DSP, Sponsored Brand Ads, and video ads to increase visibility and conversion rates.
For brands with large catalogs, it’s important to identify slow-moving SKUs early. Conduct monthly inventory audits and adjust marketing efforts toward underperforming products before they become a problem.
3. Fix Stranded Inventory Quickly
Stranded inventory refers to products that are in Amazon’s fulfillment centers but are not available for sale due to listing issues. This negatively impacts your IPI score because it counts as unsellable stock.
How to Prevent and Resolve Stranded Inventory Issues:
- Regularly check the Stranded Inventory Report: This is available in Seller Central under Inventory > Manage Inventory. Fixing issues quickly prevents unnecessary IPI penalties.
- Ensure ASIN compliance: Listings may become stranded due to Amazon policy violations, such as incorrect product details or restricted categories. Keep product pages updated and compliant.
- Monitor suppressed listings: If Amazon suppresses a listing for missing attributes (e.g., lack of images or category details), resolve the issue immediately.
- Automate stranded inventory resolution: Use Amazon’s “Fix Stranded Inventory” tool to automatically relist products when possible.
4. Maintain Healthy In-Stock Levels
Amazon rewards you for keeping products consistently in stock. While overstocking hurts your IPI, frequent stockouts also lower your score and damage your sales momentum. Running out of stock means losing both organic ranking and Buy Box share, making it harder to regain lost sales later.
Best Practices for Inventory Replenishment:
- Use Amazon’s Restock Inventory tool: This provides demand-based recommendations for how much inventory to send based on past sales trends.
- Adopt AI-driven demand forecasting: Machine learning tools like Inventory Planner, Forecastly, or Skubana help predict future demand based on seasonality and trends.
- Diversify fulfillment options: If your IPI score limits your FBA storage, consider using third-party logistics (3PLs) or Seller Fulfilled Prime (SFP) as backup solutions.
- Monitor lead times with suppliers: Long production cycles or shipping delays can lead to unexpected stockouts. Work closely with manufacturers to improve supply chain efficiency.
For larger brands, maintaining a balanced inventory strategy is key. Avoid sending too much inventory to FBA at once, but ensure you have backup stock ready in case of unexpected demand spikes.
Channel Key Takeaway
Navigating Amazon’s ever-changing inventory rules can be challenging, but keeping your IPI score in good standing is well worth the effort. A high score gives you the flexibility to scale, reduces unnecessary fees, and ensures your products are always available when customers are ready to buy.
If your IPI score is holding your business back, it’s time to take control. Channel Key helps established brands fine-tune their inventory strategies to meet Amazon’s standards while maximizing profitability. Whether you need to clear excess stock, improve sell-through, or streamline replenishment, our team has the expertise to help.
Contact us today to unlock the full potential of your FBA operation and turn inventory management into a competitive advantage.
