Amazon FBA policy changes! Beware of rejection of warehousing

Do you pay attention to the inventory performance index (IPI) in your daily operations? This data, which is always displayed on the backend homepage, is actually easily overlooked by sellers.

Since Amazon implemented IPI on July 1 last year, some sellers have been restricted from using FBA inventory space due to poor performance, resulting in performance scores below 350. The excess amount will be charged an overage fee and will no longer be able to create a shipping plan, which is very uncomfortable.

However, as long as the inventory performance IPI threshold (350 points) is exceeded, there will be no storage restrictions, and most sellers’ scores are around 400. In addition, there are no other benefits of having too high inventory performance, so no one pays too much attention to this performance.

Recently, Amazon adjusted its IPI policy. Starting from January 1 next year, the IPI threshold will be adjusted from 350 points to 400 points. Sellers with scores below this will be subject to FBA inventory restrictions.

This threatens a large number of sellers with scores of just over 400. At this point, Amazon is stuck at the end of the peak season. If they stockpile a lot of goods, won’t they be deducted points after the peak season and be charged an excess fee?

Don’t worry, I will explain to you how to calculate IPI and the process of how this restriction takes effect.

How this IPI restriction takes effect

IPI is an indicator that is constantly changing. This score is updated once a week. You can click on the IPI score on the homepage to see the score change compared to last week. The picture below shows that it has increased by 1 point compared to last week.

Although it is updated weekly, the IPI assessment is based on quarterly, starting from the last 6 weeks of each quarter. In other words, as long as you stay above the IPI threshold score during this period, you can continue to enjoy unlimited storage space in the next quarter.

In this update, Amazon will uniformly remind sellers who have not reached 400 points around November 11, warning them that they may have their storage space restricted in the first quarter of next year.

Sellers will then have about 6 weeks to improve their IPI scores, but if the seller's IPI is still below 400 in the last week (December 23), storage restrictions will be imposed until the score exceeds the threshold.

Although many sellers’ scores are slightly higher than 400, it is easy to have inventory problems at the end of the peak season in December. If the score is slightly higher than 10 or 20, it is still very dangerous. FBA warehouses will directly reject shipments that exceed the inventory limit, which will cause great losses to sellers.

The IPI score update has affected the delivery plans of some sellers. Some sellers told me that their IPI scores were only around 410 points, and they had planned to ship more goods during the peak season. However, after the policy change, they dared not ship so much.

So in order to cope with this score change, what are the methods to maintain the IPI score? Let’s start with how to calculate IPI.

How the IPI is calculated

Let’s first look at how IPI is calculated so that we can optimize it accordingly. The IPI score is determined by the following aspects: the proportion of redundant inventory, the FBA sales rate, the proportion of inventory with no sales information, and the FBA spot rate.

1. Redundant inventory ratio

It refers to the proportion of redundant inventory in the total inventory. The product's supply days exceed 90 days, or at least one item in the inventory has been stored for more than 90 days and the system determines that the cost of continuing to store it is higher than the cost of other corresponding measures (such as abandonment, price reduction, etc.). In the above two situations, FBA inventory will be determined as redundant inventory by Amazon.

Get rid of unsaleable products as soon as possible, reduce their price or discard them, so as to keep this score in a healthy range.

2. FBA Sell-through Rate

The number of orders sold through FBA. Amazon naturally doesn’t like poorly-selling inventory to take up too much inventory space. Poorly-selling inventory easily becomes redundant inventory. In other words, this indicator can be regarded as a “redundant inventory reserve”.

So as long as you sell well, you don’t have to worry too much about the first two indicators.

3. Proportion of inventory without sales information

With limited inventory space, it is natural that products with no sales information will not be allowed to exist. Generally, only when switching from self-delivery to Amazon delivery will there be no sales information. You can repair the pages of these products in time. This is a relatively easy standard to maintain.

4. Amazon Logistics Inventory Rate

The platform requires all salable listings to be in stock, especially FBA products that are endorsed by the platform to a certain extent. The standard for comparing whether the inventory is sufficient is the sales volume of each SKU in the past 60 days.

In general, as long as there is no excess inventory, sales are acceptable, and FBA products are not out of stock, you can maintain a relatively safe IPI score.

Since Amazon implemented the new 400-point policy at the end of the Christmas season this year, there will definitely be many sellers who need to clean up the unsold inventory during the peak season in time to reduce the impact on IPI. At the end, I have prepared a skill package for cleaning up inventory. Please scan the QR code below to get it from me.

PS. If you want to join the seller discussion group, you can also private message me to let me add you to the group