Amazon Inventory Performance Index
Holiday Success Strategies – Understanding Amazon’s Inventory Performance Index
There’s no pretending any longer. The weather’s turning. It’s Fall – and more importantly, it’s also the fourth quarter of your sales calendar. If you haven’t kicked into holiday planning yet, or still need a primer on optimizing your promotions as we head toward the holiday season, you’re in the right place. In this series, we’ll look at the most critical things to know and do to get the most out of seasonal sales opportunities. First up: understanding Amazon’s Inventory Performance Index.
What is Amazon IPI and Why is it Important?
Quite simply it’s the numerical rating that Amazon gives you for how your product performs from storage shelf to final sale. Most sellers have an IPI score between 400 and 800 against a possible score of 1,000. It measures four things: excess inventory, stranded inventory, in-stock inventory and your FBA (Fulfilled by Amazon) Sell Through and does two important things for you. A good IPI tells Amazon that as a seller you are performing within expectations, and it also gives you a big-picture view of how well your supply chain is working. If your IPI score is going down, you need to examine your supply chain and make adjustments.
What Happens When Your IPI Score Drops?
If your IPI score dips below 350, it can be bad news in general, but especially so around the holidays. Amazon will notify you of your low score six weeks before the end of the quarter, but during the holiday season when optimized inventory is critical to sales success, this will be too late to make necessary adjustments and capitalize on volume sales opportunities. More critically, a low score means you are mismanaging your supply chain and automatically means Amazon will limit your storage space allocation. And if you go over your storage allotment you will not be able to ship inventory of that storage size until stocks fall below the limit – meaning you need to sell more and quickly. If inventory is in FBA over that limit you are also charged $10 per cubic foot for every cubic foot over your storage limit. That can add up quickly.
Strategies to Improve Your IPI
It’s a good idea to monitor your IPI closely on an ongoing basis – but particularly as we head into the busy sales season of the holidays. If your score is down there are several strategies to repair it and bring your inventory management process back in line quickly.
- Review excess inventory and recall it from the warehouse or destroy it
- Understand and manage your FBA Sell Through Rate. This is calculated by the number of available product units sold in 90 days divided by the number of available units in the warehouse, or the percentage of time your replenishable FBA products have been in stock for the past 30 days, weighted by the number sold in the last 60 days,
- Assess and tackle any stranded inventory – this is product that is in stock but unavailable for sale due to problems with listings. Step one: fix the listings by examining every aspect of the page or the ad. Are keywords appropriate, is the pricing right or needs adjustment, is the listing optimized on the page for visibility and click through. Step two: recall product as needed to get your inventory numbers back in line.
Adjustments and Assistance
There are a lot of issues, levers and, variables to think about with your IPI score management and oversight of your supply chain process. But it’s worth keeping a careful watch and making the necessary adjustments to keep your business, brands, and products on plan. Look at things like conversion: how much inventory is converting to sales and how much awareness and action is your advertising and promotions really driving? Need help with any of this information or implementation? Our Channel Key team is here to help.