Amazon has started to score FBA (Fulfilment by Amazon) sellers on their inventory. Rewarding those who run a good operation and penalising those who don't. Amazon has said the matrix is based on“how well you drive sales by stocking popular products and efficiently managing on-hand inventory”
Where can you find it?
It can be found in your seller central account under
Inventory – > Inventory Planning – > Performance
https://sellercentral.amazon.co.uk/inventory-performance/dashboard
It can be found in your seller central account under
Inventory – > Inventory Planning – > Performance
https://sellercentral.amazon.co.uk/inventory-performance/dashboard
What is Inventory performance Index?
Just like the Google Search Algorithm, Amazon does not tell us exactly how the Inventory performance Index is calculated but there are four factors that affect it.
- Excess inventory
- Sell-through
- Stranded inventory
- In-stock inventory
Excess inventory & Sell-through
This is the number of units that you currently holding within Amazon’s warehouses. Amazon wants to you hold just the right amount of stock in its warehouses to meet the demand. Hold too much and the inventory size is considered excessive and Amazon will recommend you reduce the price to ‘Sell Through’ the stock. On the other side, when you don’t hold enough stock then you will have a low score on the ‘In Stock Inventory’ as you keep running out of stock.
This is the number of units that you currently holding within Amazon’s warehouses. Amazon wants to you hold just the right amount of stock in its warehouses to meet the demand. Hold too much and the inventory size is considered excessive and Amazon will recommend you reduce the price to ‘Sell Through’ the stock. On the other side, when you don’t hold enough stock then you will have a low score on the ‘In Stock Inventory’ as you keep running out of stock.
Stranded inventory This is your stock that is held in Amazon’s warehouses that has problems, so it can't be sold. Normally this is where you have sent an item into Amazon’s warehouses but forgotten to tell Amazon that you want to sell it through FBA rather than MF (merchant fulfilled). It can be other things like an ASIN change that needs approval or a listing error to name a few.
In-stock inventory This is quite simply how often your items are in stock. If you are a Private label or Brand seller then it is likely your products will be in stock all the time, but if you are a wholesale or even an arbitrage seller, then it is likely you will sell through your stock all the time and not resupply it.
Why should I care? To put it simply, manage your score well and you can store as much stock as you can buy, in Amazon’s warehouses. Manage it badly, then they will restrict what you can store. This might not be a big issue right now but come quarter 4 and Christmas time you will want to use that storage space to increase sales.
What score should I be looking for? Scores range from zero to 1,000. Anything above 400 shows that your business is doing well, whilst a score below 350 shows that there are issues and you need to take action to improve your score.
What do I need to do to improve the Amazon Inventory Performance Index (IPI) score?
Amazon offers you some great insights, which tell you how to improve your score, which you should read and follow. Here are a few tips we have put together that Amazon doesn't say to help you even more.
Excess inventory & Sell-through Firstly don't just send everything you have into Amazon if you don't think it will sell within the next month, but stagger it over the weeks. You will simply be paying for storage if you do this and this will also show as excess stock on the metrics. Secondly, for any stock, you currently have in Amazon’s warehouses, review this by sorting your inventory by age then reviewing it product by product. Ideally, you want to sell it, so think about reducing the price or creating a removal order if it's something you want to hold on to for a few months.
Stranded InventoryYou should be checking for stranded inventory daily as this is stock that is ready to sell but can’t be sold due to a simple issue. So do check this daily and this will improve the score and your sales.
In stock InventoryIt's wise to close all the listings from your inventory at least weekly. Don't worry if you might buy it again, as you can always add it back into your inventory. Clearing down, you're out of stock and inactive products, should happen at least weekly, not only to improve your IPI score but also to help protect your account from intellectual property complaints. We have seen it time and time again, a brand that we have been selling for years, all of a sudden worries about fakes on Amazon. They contact Amazon and ask them to issue an intellectual property complaint to any seller who has any of their ASIN’s on their account. You can only remove these with current wholesale or manufacturer invoice. This is why we recommend you clear them down every week, to protect your account.