On December 22nd, 2021,
Amazon announced that effective January 1, 2022, the IPI threshold is dropped to 400 from 450 now.
Amazon is always concerned about its fulfilment centres; they want to use their FBA fulfilment centres as fulfilment centres, not as storage centres.
Therefore, to manage fulfilment storage space better, the inventory storage limit is applied according to your IPI score. While many aspects of IPI exist that many FBA Sellers are still not aware of, let’s start with the basics.
What is Amazon’s IPI Score?
IPI stands for the “Inventory performance index”. The score shows how efficiently and productively you can manage your inventory level sales, fix listing problems and keep popular products in stock.
The IPI score depends upon 4 metrics
- In stock Rate
- Sell-through Rate
- Excess Inventory Percentage
- Standard Inventory Percentage
How is the IPI calculated?
IPI is calculated by taking the total of units shipped in the last 90 days divided by the number of units in FBA during that period.
In short words, it’s a measure of the speed at which you sell your inventory. Generally, Amazon calculates IPI for each quarter, like March 31, June 30, September 30, and December 31.
Your inventory performance dashboard also displays a performance bar that indicates your IPI score Let’s take a look
- Dark Green (Excellent)
- Light Green (Good)
- Yellow (Fair)
- Red (Poor)
Why Amazon IPI score is important?
The Amazon IPI score relates directly to the storage space that Amazon allots its FBA sellers.
New Update Amazon IPI Score
From January 1 2022, Amazon will implement the storage limits to sellers according to their IPI score.
Note: Amazon states that these storage limits will only apply to professional sellers in its guidelines.
The individual seller will have the same storage limit that cannot be increased or decreased.
According to the New update, if your IPI score is above 400, the seller will get unlimited storage volume at the FBA warehouse. You will be notified with an email from Amazon about your potential storage limit.
However, if your score is below 400 by the end of the quarter, automatically, the limit will be applied for the next quarter, and you will be notified with the email.
Storage Limit Criteria
For Individual Selling Account
The storage limit for the individual seller is 10-cubic feet, and it will not change.
For Professional Selling Account
Typically, the standard storage limit for the professional seller is 25-cubic feet.
But in some cases, professional sellers may or may not have storage limits depending on the criteria:
- New sellers who are not active for at least 26 weeks or sellers who do have not enough sales data to generate an IPI score will not receive any storage limit.
- Sellers who maintain IPI scores only by two checkpoints will not be subject to any storage limit for any type.
Amazon Storage Types
Amazon applies storage limits for six storage types that are
Each storage type occupies a different space so, before sending your inventory, measure your product in cubic feet.
How to calculate cubic feet in inches?
Multiply the length x width x height to get the volume of the product or item.
Divide the volume by 1,728, which is 12 cubic inches.
For example, if take the example of a purse.
The dimensions of the purse are 7.9 x 1.6 x 5.1 inches.
If we multiply them, we will get 64.464 which is the volume of the purse now divided by 1,728 is 0.0373 cubic feet.
How to improve the IPI score?
Well, Amazon never mentions any precise methods to improve the IPI score, but according to our research and experience, here are some of the ways you can improve your IPI score.
Excess inventory and sell-through
Amazon keeps a record of your sell-through and additional inventory metrics. This indicates whether your selling is inventory is selling or not Amazon has a detailed record of it.
Amazon gives you an “Inventory Age” tab to improve your metrics in this area. With the help of this tab, you can deal with your aged or excess inventory like
- Which ASIN has low traffic
- Which ASIN has a low conversion
- Can reprice the inventory
- Can sort inventory by its age
This data will help you to manage your inventory smartly. The ASINS with low conversion or traffic don’t send their units to the warehouse. In this way, you can also save your storage fees.
The second method is to maintain your Stranded inventory.
The Stranded inventory is the units stored at the fulfilment centre but cannot be sold because their listing is missing or incomplete. Still, Amazon will continue to charge you for that inventory.
To improve your IPI score, it’s essential to check your Stranded inventory regularly and resolve the problems. Like you may need to provide more info, need to edit the listing, or in some cases, you have to create a removal order.
The third way to improve the IPI score is to manage the in-stock inventory metrics.
Amazon always makes sure that when any customer comes on the platform for shopping, they will get whatever they want; therefore, Amazon recommends its sellers to keep an inventory of ASINs that sell well.
With the help of the “Restock inventory” tab, you can improve the in-stock inventory metrics.
Instead of deleting or closing inactive listing to improve the in-stock inventory metrics, you can choose “hide recommendations” for all that ASINs.
The best practice is to regularly check the Restock inventory tab to hide the restocking recommendations on time, as it will help you maintain your IPI score.
What happened if I exceed my FBA Storage limit?
According to the FBA storage limits policies, if you exceed your FBA storage limit or if Amazon gives you a storage limit, you will not be able to create shipment for that storage type until your inventory level drops below the limit.
As I mentioned earlier, the standard storage limit for the professional seller is 25-cubic feet. So if you exceed this limit, say you have 26 cubic feet of standard inventory at the fulfilment centre.
Then you cannot create any new shipment in the standard storage type. But if you are below the limit for other storage types like Oversize or Apparel, you can create shipments for those types.
In the end, I will say it’s a very beneficial update that sellers who cannot reach 450 IPI scores now can easily maintain the 400 scores and can increase their FBA storage limit.
This update will help many brands fulfil their sales goals that they could not achieve due to inventory limits.
But the one that does not change is the “Restock limit” Amazon should remove the restock limit for their best sellers. Until Amazon does that, make a solid plan for increasing your IPI threshold. If you need help managing or improving your IPI score, you can consult Bizistech.
If you have any questions or concerns, feel free to ask. Comment below, and we will be happy to help you. Thanks.