Improving Amazon inventory health starts with understanding how the Inventory Performance Index (IPI) score functions as a primary metric for your account. This score is based on key factors like excess inventory, sell-through rate, and stranded inventory management. By maintaining a high IPI, you avoid storage limits and potential overage fees that eat into your profit margins. Sellers who stay proactive with their stock levels often see better placement and lower long-term storage costs, which helps keep the business profitable.
What is the Amazon Inventory Performance Index?
The IPI score is a single metric that represents your inventory management efficiency over time. It is not just about having products in the warehouse; it is about having the right amount of the right products. Amazon uses this score to determine how effectively you move your stock, how much space you consume, and how well you resolve listing errors. A low score indicates that you are holding onto stale stock or failing to address inventory issues that prevent products from being sold. Consistent monitoring of this score allows you to adjust your replenishment strategy before storage limitations are applied to your account.
To keep this score in a healthy range, focus on the balance between your sales velocity and the amount of stock you send to Amazon fulfillment centers. Many sellers make the mistake of overstocking during peak seasons, only to see their IPI drop when the sales velocity does not meet their optimistic projections. Check your dashboard every Monday to see if your score has shifted. By tracking these fluctuations, you can identify which specific products are dragging down your performance and address them before they impact your overall storage capacity.
How can you reduce excess inventory?
Excess inventory is perhaps the most significant factor that lowers your IPI score. Amazon defines excess as stock that is not meeting a certain sell-through threshold or has been sitting for too long without movement. When you hold too much inventory, you pay more in storage fees and limit the amount of space you have for high-performing items. Use the Inventory Age report to identify items that have been in stock for more than 90 days. Once identified, you need a plan to move this stock quickly to prevent further accumulation of storage fees.
Consider running aggressive promotions for slow-moving units. Coupons, lightning deals, or bundle offers can help clear out stock that is stagnating in the warehouse. If a product is truly dead stock, it might be more cost-effective to create a removal order rather than continuing to pay monthly storage fees. Remember, every unit that sits idle is costing you money and space. Creating a strategy to cycle your inventory ensures that your storage capacity is reserved for items that actually generate revenue, which in turn boosts your IPI score.
Why is the sell-through rate critical for your score?
Sell-through rate measures how many units you have sold relative to the amount of inventory you have on hand. A higher sell-through rate suggests that your products are in demand and that your replenishment strategy is accurate. If you have 500 units of a product and you sell only 10 per month, your sell-through rate will be very low. Amazon rewards sellers who maintain a high velocity, as it signifies that the inventory is serving the customer base efficiently. You can calculate your rate by dividing your total units sold over the last 90 days by the average number of units you held in stock during that same period.
To improve this metric, you must refine your demand forecasting. Look at your past sales data to determine how much stock you truly need to satisfy customer orders for the next 30 to 60 days. Instead of sending large shipments that last for six months, consider smaller, more frequent shipments. This practice keeps your inventory fresh and prevents the accumulation of excess stock that drags down your sell-through metrics. By staying lean, you minimize the risk of having too much capital tied up in inventory that is not moving.
How to manage stranded inventory effectively?
Stranded inventory refers to stock that is sitting in an Amazon fulfillment center but does not have an active offer on the website. This happens frequently due to listing errors, account health issues, or mistakes made during the creation of a shipping plan. Stranded inventory is a major red flag for Amazon because those items are taking up space without being available for purchase. You should check the Fix Stranded Inventory page in Seller Central at least once a week to ensure no items are sitting in this status.
- Verify that your listing is active and that the price is not suppressed.
- Check for category-specific listing errors that might be hiding your product from buyers.
- Ensure your images and product descriptions meet current guidelines to avoid listing deactivation.
- Create a removal order immediately for items that cannot be sold or fixed.
- Review your account health notifications for any policy warnings that might cause listing suspensions.
Steps to keep your inventory healthy
Maintaining a healthy inventory score requires a systematic approach to operations. In a typical account, this involves a weekly review of key metrics and proactive adjustments to stock levels. Do not wait for your IPI score to drop before taking action. Instead, build a routine that allows you to catch issues before they turn into permanent problems for your store.
- Review the Inventory Performance dashboard to identify your lowest-scoring products.
- Delete inactive listings that no longer represent sellable inventory.
- Audit your storage utilization to see which ASINs are taking up the most room.
- Adjust your replenishment quantities based on real-time sales velocity rather than historical guesses.
- Use Amazon-provided tools to identify opportunities for reducing storage fees.
How Alien Road applies inventory management
At Alien Road, our approach to inventory management focuses on data-driven replenishment and consistent monitoring. For a typical client, we start by performing a deep audit of the Inventory Age and Excess Inventory reports. We look for patterns where over-ordering has caused a bottleneck in the warehouse. By mapping out a 90-day demand forecast, we help the client align their shipping plans with actual market demand. We also prioritize the resolution of stranded inventory as part of our weekly account health check, ensuring that no stock remains invisible to the buyer. This systematic process allows our clients to maintain a high IPI score and avoid the costs associated with poor storage management.
Where to start this week
Begin your inventory improvement process by logging into your Seller Central account and navigating to the Inventory Performance dashboard. Your first task is to identify any inventory that is currently marked as stranded. Resolve these listings immediately by either updating the product details or initiating a removal order. Once your stranded inventory is cleared, sort your inventory by ‘Inventory Age’ and identify any items that have been in the warehouse for more than 180 days. Calculate a simple plan to liquidate these items through price reductions or bundled offers. By taking these small steps, you will clear up space and begin the process of raising your IPI score.
Finally, set a recurring calendar reminder for yourself to review your inventory reports every Friday. Consistency is the secret to a high inventory score. By monitoring your sell-through rate and address excess stock before it becomes a long-term storage issue, you ensure that your business remains flexible. Avoid the temptation to over-order during periods of high growth, as this often leads to the exact inventory health problems you are trying to avoid. Keep your operations lean, your data accurate, and your focus on products that generate consistent sales.
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