Seller’s Guide to Amazon Inventory Performance Index
As an Amazon seller, you will want to know whether your inventory performance in Amazon is going well or not. In order to do that, you will have to use the Inventory Performance Index, a new metric launched by Amazon mid-2018.
What is the IPI?
The Inventory Performance Index is a metric system which combines the data coming from your sales, inventory and costs. It then measures the overall growth and efficiency of your FBA business. Your IPI is mainly based on how will you keep your popular products in stock, maintain healthy inventory levels and fix listing problems. With this index, the higher your score, the better your performance is.
How does it work?
As per the definition above, it collects data from your business and measures your inventory performance. It measures the top three influencing factors of your inventory performance, including:
The excess inventory reflects how much of your inventory has been identified as excess. A high percentage can decrease your business’ profitability because of too much storage fees and handling costs.
The in-stock inventory measures how well you stock your popular products in your inventory.
The stranded inventory shows how much of your inventory is not available for purchasing due to a listing problem. Inventory that is not available for purchase can lead to loss of sales but still acquires storage fees.
How can you increase your score?
IPI provides you a score represented by a bar rating with different colors: Red (Poor), Yellow (Fair), Light Green (Good), and Green (Excellent). As someone who wants to be at the top of the online business, your aim is to have your inventory performance within the range of the color ‘green’.
For you to do this, you have to follow the three specific ways provided in the Inventory Performance Dashboard, which include:
- Restocking recommendations so you can increase your in-stock rate.
- Excess inventory suggestions so your storages fees and carrying costs can be reduced.
- Stranded inventory suggestions for you to ensure that your inventory is always available for purchase.
Adding IPI to your seller account is important in boosting your FBA business. Not only will it help you to easily identify the performance of your inventory, but will also encourage you to improve your inventory management. And since you can easily view any unfavorable outcome in your inventory performance, it is easier to find a solution and fix the problem.