Starting 1st July 2018, Amazon will be closely monitoring how well you manage your inventory. Having invested billions of dollars into the warehouses, Amazon want the space to be utilised more efficiently. In an attempt to reduce the mess, Amazon has devised a program called “Inventory Performance Index.
Inventory that stays in warehouses for too long without being shipped will either have to be removed or get their listings fixed or it will negatively affect the seller’s IPI (Inventory Performance Index) score.
How does IPI (Inventory Performance Index) matter to you as a seller?
If you’re IPI (Inventory Performance Index) score is less than 350, you won’t be able to send more items to Amazon warehouse. Moreover, you’ll be charged a monthly “overage” fee on the inventory that exceeds storage limits.
Only those with a score of 350 or above won’t face any restrictions on their storage space.
The score ranges from 0 to 1000.
Up until now, sellers could rent unlimited storage space regardless of how well they’re selling or shipping out their items.
“As we continue to grow and support more sellers that desire to make their products Prime-eligible, we introduced changes that will help sellers manage their inventory and help us more efficiently receive inventory and deliver products to customers,” – Amazon
The page says: “The new metric aggregates data from your sales, inventory, and costs to measure the overall growth and efficiency of your FBA business. The higher your score, the better your performance.”
Though, it is clear that IPI is another Amazon’s attempt to add more automation to the system thereby efficiently managing growing number of third party FBA or prime sellers. In 2017, fulfilment costs, which make up Amazon’s biggest operating expense increased by 43 percent to $25.2 billion, while total sales rose 31 percent.
What should you do?
- Click here to check your your IPI now.
- Make sure you have an IPI above 350 by the quarter’s end.
- Move stranded and excess inventory immediately.