Detailed explanation of Amazon IPI scoring rules and their influencing factors

For FBA sellers, how to balance inventory quantity is an important issue. Too little inventory will lead to out-of-stocks, which will affect sales; too much inventory will lead to slow sales, increase inventory holding costs, and reduce ROI. To this end, Amazon has launched the IPI (Inventory Performance Index) inventory performance indicator to help sellers better manage inventory. The IPI score ranges from 0 to 100, and the current index threshold is set at 450 points.

IPI scoring rules

The IPI index presents four colors according to different values: dark green (excellent), light green (good), yellow (average), and red (poor). In addition, Amazon has introduced ASIN-level storage capacity limits for single-product SKUs in FBA, including storage volume and the number of SKUs that can be stored, and allocated corresponding quantities and storage capacity by product category (such as standard size, extra large size, clothing and shoes). . Storage capacity and SKU quantity are positively related to the IPI index. That is, if the IPI index is above 450 points, the storage capacity is unlimited and the number of SKUs is limited; if the IPI index is below 450 points, both the SKU quantity and storage capacity will be restricted.

For newly registered stores, the maximum number of SKUs in a standard warehouse is 1,000, and there is no limit on warehouse capacity for the time being. It is worth noting that the IPI system is not currently applicable to the Australian market, but the number of SKUs is still limited. IPI’s scores are updated weekly and reviewed twice, 6 weeks before the end of each quarter and the last week at the end of the quarter. If a seller reaches the required score during either of the two review periods, they will receive unlimited inventory space in the next quarter.

Factors affecting IPI score

Amazon has launched four scoring factors based on IPI: FBA inventory redundancy rate, FBA inventory turnover rate, FBA inventory error rate and FBA hot-selling spot rate.

FBA inventory redundancy rate

The redundancy rate reflects the cost pressure that excess inventory brings to sellers. The number of redundant SKUs refers to the number of products that continue to consume FBA warehousing costs but are in a state of slow sales. The data is based on product demand and related commodity costs. The estimated storage cost refers to the idle cost of the FBA warehouse for these unsaleable products, including monthly storage fees and long-term storage fees.

FBA inventory turnover rate

FBA inventory turnover rate reflects the dynamic balance between sales and FBA inventory. The calculation formula is: sold rate = number of items sold (in the past 90 days) × 100%/total inventory (in the past 90 days). According to Amazon’s standards, less than 1.0 is poor, 1.0 to 2.0 is pass, 2.0 to 7.0 is good, and more than 7.0 is excellent. A high turnover rate has a positive impact on the growth of the IPI index.

FBA inventory error rate

The FBA inventory error rate reflects the proportion of problematic Listing inventory quantity. The calculation formula is: error rate = number of invalid items × 100%/total inventory. The higher the error rate, the higher the corresponding FBA warehousing costs, and the lower the overall ROI.

FBA hot selling spot rate

FBA spot rate reflects the inventory efficiency of best-selling products. The calculation formula is: Inventory rate = ratio of days on spot (in the past 30 days) × sales speed (in the past 60 days)/sum of sales speed (in the past 60 days). The higher the value, the better-selling SKUs are in stock and have stronger profit expectations.