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The Details You Need To Know About Amazon Inventory Performance Metrics
Kinghood International Logistics Inc | Updated: Sep 28, 2018

Inventory management ability is the core competitiveness of the amazon sellers, in order to let the seller to better manage inventory, and remove those who can't sell products, improve the overall revenue, amazon launched a new inventory performance index (IPI), and has set up a take effect on July 1, each seller IPI score will review in each quarter, scoring less than 350 sellers account inventory will be limited, until the next quarter to score over 350 points.Excess inventory will be charged at a rate of $10 per cubic foot per month.There is no limit on the inventory of sellers with a score of or above 350, but FBA's short-term and long-term storage costs should still be paid normally.

So what are the factors that affect IPI?It is understood that the IPI score mainly depends on the following four factors:

1. Sell-through rate (the most important factor at present)

2. In-stock rate (spot rate)

3. Excess inventory percentage (Excess inventory ratio)

4. Stranded inventory percentage

How will IPI affect sellers?Obviously, an IPI score above 350 is a big benefit to sellers, and inventory can be unlimited.Sellers with scores above 350 can relax a little, but still maintain good credit and improve IPI scores.

Sellers need to know that there is a time lag between taking action and recalculating to update scores.Sellers are usually updated on the same day as they run out of stock and restock, and the sell-out rate is only updated once a week.Especially if the seller is close to the IPI threshold, plan and adjust the replenishment inventory and carefully add new products.Note here: the IPI score at the final evaluation date is the most critical, and will have an impact on warehouse space throughout the quarter.

How should sellers respond to the new policy?

For those with low IPI scores, it's not just about survival, it's about growth with limited inventory.So what should the seller do?

1. Determine new inventory limits.Amazon allocates separate storage space for clothing, standard sizes and oversized items.If the seller catalog spans multiple categories, placing products in separate warehouses for those categories can at least reduce some of the seller's warehousing pressure.

2. According to amazon notice, the warehousing limit for sellers is no less than 25 cubic feet per product.Especially for sellers with a good sales history, the storage space provided by the platform may be higher than the limit value.

Prioritize minimizing inventory.If the seller's inventory exceeds the limit, the seller still has time to sell some inventory before amazon calculates the excess fee.This is done by increasing the sell-out rate or removing products from FBA warehouses.Merchants can choose to transfer some of their goods to third-party overseas warehouses.Replace the label and return to the FBA warehouse with a brand new product.

4. Clear category catalogue.For all sellers on amazon, the policy aims to clean up some underperforming or slow selling products and help improve the experience that sellers offer.Vendors can use tools to clean up categories that may be out of date.

The amazon policy update could change what sellers have traditionally done, including third-party sellers.The only thing that's certain is that amazon's policy update is definitely more than that, but sellers don't need to worry too much and take things as they come.

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