Inventory management is important not just for your over-all Amazon account health but also to cater to your consumers’ demands. When your products are always in stock, your customers won’t resort to your competitors. On the other had, if you overstock your items, you end up paying extra for storage fees.
Amazon recently implement the restock limits which greatly affected most sellers. Now that the fourth quarter has started, sellers need to make an accurate forecast and manage their inventory wisely. However, if your IPI score has been consistently at or above the minimum threshold, then you should not worry about your restock limits.
Inventory Management and your IPI Score
An IPI score or Inventory Performance Index score measures how effective you are in managing your FBA inventory. The scoring is from 0 to 1000, the higher the score the better. This score will be shown on your inventory dashboard with a graph that shows the thresholds. The minimum threshold is 450, so anything below that and Amazon will penalize you.
The IPI score is calculated twice every 6 months. The first instance is 6 weeks before the first quarter ends, and the second instance would be at the end of the second quarter. If your score is at or above the minimum threshold during those scoring weeks, then you qualify for unlimited storage. However, if you fail to meet the minimum threshold during those scoring weeks, Amazon will set a storage limit for the next quarter.
To view your IPI score , you can go to Inventory > Inventory Planning. Your IPI score can be viewed from the dashboard or click on the performance tab to view more details related to your IPI score.
Take note that the IPI score is only available to the following sellers with:
- a professional selling plan
- has inventory at the fulfillment center
- has recent account activity
Restock Storage Limits vs Restock Limits
In order to effectively manage your inventory, you have to be aware of the difference between restock storage limits and restock limits. This will help you create a fulfillment plan so you don’t overstock or run out of stock.
Restock storage limits are based on volume and measured in cubic feet. This is the fulfillment center capacity allocated for your products. If your IPI score is at the minimum threshold of 450 or exceeds it, then your restock storage limit should be unlimited.
On the other hand, your restock limits are not affected by your IPI score. Restock limits are based on units. This refers to the number of units that you can send to fulfillment centers.
How Inventory Management Affects Restock and Storage Limits
Having an efficient inventory management process helps you avoid common inventory issues. As an Amazon seller, you just need to avoid these issues so you won’t have problems with your storage and restock limits.
Here are the common issues that you need to avoid:
- Running out of inventory – You should always have enough products to meet the demands of your consumers. If you have limited inventory, you can slow down the demand by pausing your ad campaigns or slightly increasing your price. Make sure that you do not set it too high because it will affect your conversion rates.
- Overstocking Inventory – Having too much inventory is just as big a problem as running out of it. Amazon charges monthly storage fees that vary based on the size of your inventory and the time of the year. During the fourth quarter, those fees increase to 3 times higher. Unsold products sitting in the inventory for more than 90 days are considered excess inventory.
- Having Stranded Inventory – Many sellers don’t know how to fix this problem so end up having a lower IPI score. Stranded inventory are those that are no longer connected to an active listing. The Fix Stranded Inventory tool lets you solve this issue via 3 actions: create a new listing, for disposal, or check the auto-removal date if it is close.
- Acquiring Long-term Storage Fees – Inventory that’s been stuck in fulfillment centers for more than 365 days incur additional fees on top of the monthly fees. The monthly long-term storage fee is $6.90 per cubic foot or 15 cents per unit or whichever is higher.
Inventory management is crucial in your role as a seller. To have an excellent IPI score, make sure you use efficient tools to help manage your inventory. Stay tuned to the next blog where you will read about tools to manage your inventory and helpful tips in properly managing your inventory.
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“Inventory is money sitting around in another form.”–Rhonda Adams, USA Today