In a series of updates, Amazon recently announced that a few major changes were going to take place in its systems starting January 1, 2020. Out of all the significant impending updates, one future development that Amazon sellers should watch out for is the increase in the minimum Inventory Performance index score.
Starting January 1, 2020, Amazon’s minimum Inventory Performance index score will be raised from 350 to 400 as a means to improve overall seller performance and quality. As a follow up to the 2018 implementation of an algorithm-driven Inventory Performance Index (IPI) scoring system, the incoming minimum score update seeks to quicken the overall transaction process.
What does the Inventory Performance Index signify in the first place?
The Inventory Performance Index, in essence, is Amazon’s way or determining exactly how fast a seller’s inventory moves through their system. It starts with the seller to the fulfilment centre and all the way to the customer.
Amazon uses the IPI system as a means to ensure that every piece of inventory that lands in their fulfilment centres end up in the hands of a customer. Depending on how fast a product is sold and shipped out, a seller will receive an appropriate numerical score that determines their ability to sell and comply with Amazon’s standards.
What does the score mean?
When it comes to interpreting your IPI score, it is important to note that having a higher numerical score is optimal, especially when it goes past the 550 mark. The high score means that your inventory is performing particularly well as opposed to other options in the marketplace.
Conversely, having a score lower than the 400 mark means that your inventory isn’t moving as fast as it should be, indicating that there is a sort of problem taking place within your system or process. With the incoming update, however, having a score lower than 400 can be quite worrying because it can lead to incurring costly penalties and inconveniences, such as overage fees.
Why should you care about your Amazon Inventory Score?
The importance of improving your overall IPI score lies in the impact of the mandatory inventory test that Amazon carries out six weeks before the end of the quarter.
If your score is determined as dissatisfactory, then Amazon will send you a six-week warning to improve your overall score to go beyond the 400 mark. Should you fail to improve your score, then FBA limitations will be imposed starting next quarter, which means a harder time gaining sales and making a profit.
How is the IPI score determined?
Generally, your store’s IPI score is determined through once-a-week measurement care of Amazon’s algorithm, which seeks to analyze four key categories, namely:
Excess inventory percentage
FBA sell-through
Stranded inventory percentage
FBA in-stock rate
After your final score is determined, you can check your performance in each component to better understand how you can improve the overall rating and avoid costly penalties in the following week’s evaluation.
Final words
With Amazon’s minimum IPI score update approaching, it is vital to take the necessary steps in improving your store’s overall ability to move items from your warehouse to the customer as fast as possible. By improving your IPI score just in time for the standard evaluation, you can avoid any costly penalties while ensuring that the flow of satisfactory revenue remains steady as can be!
If you are looking for an Amazon accountant in Australia to help you manage your Amazon accounting, get in touch with us today! We’re happy to help.