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OUR GOAL
To provide an A-to-Z e-commerce logistics solution that would complete Amazon fulfillment network in the European Union.
For Amazon FBA sellers, inventory is usually seen as the greatest asset. However, in the eyes of Amazon’s algorithm, stagnant inventory is a liability. If your goods aren't moving, they are taking up valuable real estate in fulfillment centers—space that Amazon would rather sell to a merchant with a higher turnover rate.
This friction is quantified by the Inventory Performance Index (IPI). IPI acts as a performance score assessing inventory management efficiency in FBA, similar to a credit score metaphorical.
Many sellers only pay attention to their IPI when the warning lights flash—usually just before quarterly storage limits are recalculated. However, treating IPI as a quarterly checkbox is a dangerous strategy that can lead to restricted storage capacity, costly overage fees, and a paralyzed supply chain during peak seasons.
Understanding the mechanics of IPI is not just about avoiding penalties; it is about optimizing capital efficiency. Below is a deep dive into how the algorithm works, the logistics behind the score, and actionable strategies to maintain a healthy flow of goods.
Decoding the IPI score: More than just a number
The Inventory Performance Index measures how efficient your inventory management is over time. The score ranges from 0 to 1000.
While Amazon keeps the exact weighting of the algorithm proprietary, the correlation between efficient logistics and a high score is direct. The system evaluates your past and current inventory behavior to predict how well you will manage stock in the future.
The critical thresholds
Amazon sets a minimum threshold score, which is subject to change based on available capacity in their fulfillment network.
- Danger zone (Below 400): If your score falls below the cutoff (historically varying between 350 and 450, currently often cited around 400), you are subject to storage limits and potential long-term storage fees. This restricts your ability to send new inventory (creating a "restock limit") and charges you significantly more for the space you already occupy.
- Healthy range (450–550): You are generally safe from immediate limits, but you are not optimizing your potential.
- Gold standard (550+): Sellers in this range rarely face storage issues and are viewed as efficient partners by the platform.
Crucially, the IPI score is calculated based on recent performance (usually the last 90 days), meaning logistics decisions you made three months ago impact your capacity today.
Four pillars of IPI performance
To manipulate the score, you must understand its four influence factors. These appear on your Inventory Performance Dashboard, and improving them is the only way to lift your IPI.
1. Excess inventory percentage
This is arguably the most impactful factor. Amazon defines "excess" inventory as units that have been sitting in fulfillment centers for more than 90 days and have a low probability of selling soon based on your historical demand.
Excess inventory hurts you twice:
- Direct IPI hit: It signals poor capital rotation.
- Holding costs: It accumulates monthly storage fees and eventually long-term storage fees (aged inventory surcharge).
Logistics reality: Holding 1,000 units of a slow-mover at FBA is a logistical error. It is cheaper to hold that stock in a third-party warehouse (3PL) and drip-feed it to Amazon.
2. FBA sell-through rate
Your sell-through rate is the ratio of units sold to the average number of units in stock over a rolling 90-day period.
Sell-Through Rate = Units Sold (Past 90 Days)
Average Inventory (Past 90 Days)
A rate below 1.0 means you hold more stock than you sell in three months. Amazon prefers a sell-through rate of 2.0 or higher (meaning you turn your inventory over twice in 90 days). High sell-through indicates high velocity and efficient use of shelf space.
3. Stranded inventory percentage
Stranded inventory refers to stock currently sitting in an Amazon warehouse that does not have an active listing on the marketplace. This usually happens due to listing errors, pricing suspensions, or compliance issues.
From a logistics perspective, this is "dead weight." The inventory occupies space but cannot generate revenue. Even a small percentage of stranded inventory can disproportionately drag down your IPI because it represents 0% efficiency.
4. FBA in-stock rate
While low in-stock does not directly lower IPI, it indirectly affects sell-through, which is a weighted factor in the algorithm. Amazon does not publish exact weighting.
However, going out of stock indirectly hurts your IPI because:
- You cease to generate sales velocity (hurting Sell-Through).
- When you restock, the system may over-estimate your needs based on old data, leading to future excess inventory recommendations.
The In-Stock Rate is primarily a metric for opportunity cost—showing you how much revenue you missed—rather than a direct penalty mechanism.
The logistics of avoiding storage limits
When your IPI drops, Amazon imposes Storage Capacity Limits. Previously, storage limits were based on unit count; Amazon now calculates based on cubic volume, emphasizing space efficiency.
If you exceed your volume limit:
- Inbound shipments blocked: You cannot create new shipping plans to FBA.
- Overage fees: Amazon charges a massive "Inventory Storage Overage Fee" (often exceeding $10 per cubic foot) for every day your inventory exceeds the limit. This destroys margins instantly.
Avoiding this requires a shift from a "bulk storage" mindset to a "lean logistics" mindset.
Strategy 1: The "drip-feed" supply chain model
The most effective way to maintain a high IPI is to stop treating Amazon FBA as a warehouse. Amazon is a fulfillment center, not a storage facility.
Using an external logistics partner (3PL) allows you to implement a "drip-feed" strategy:
- Import your bulk stock from manufacturers to a local 3PL warehouse (e.g., in France or Poland).
- Keep only 30–45 days of supply at Amazon FBA.
- Replenish FBA stock weekly or bi-weekly from the 3PL hub.
This artificially inflates your Sell-Through Rate because your denominator (Average Inventory) remains low while your numerator (Sales) stays constant.
Strategy 2: Aggressive removal of aged inventory
Many sellers hesitate to remove stock because of the removal fees or the sunk cost of the product. This is a fallacy. The cost of long-term storage and the damage to your IPI score (which limits sales of your best products) far outweighs the cost of liquidating bad stock.
- Automated removal settings: Configure Amazon to automatically liquidate or return inventory that has been in the warehouse for 365+ days.
- Strategic disposal: If the item costs less than the removal fee + shipping, destroy it. It is painful, but necessary for the health of the account.
Strategy 3: Fixing stranded inventory immediately
Make it a daily habit to check the "Fix Stranded Inventory" tab.
- Listing errors: often require a simple template re-upload.
- Pricing errors: If a high price deactivated the listing, lower it to reactivate, then adjust your strategy.
- Change to FBM: If you cannot fix the listing immediately, switch the fulfillment method to "Fulfilled by Merchant" (FBM) to stop the clock on FBA stranded metrics, then create a removal order to get the stock out of FBA.
How to boost IPI quickly
If you are approaching the end of a quarter and your score is hovering near 400, you need short-term tactics to boost velocity.
Flash sales and outlet deals
Price cuts alone often aren't enough. You need to spike the velocity to improve the Sell-Through Rate.
- Amazon outlet: Submit eligible overstock items to Amazon Outlet deals. This is one of the fastest ways to clear volume.
- Buy one get one (BOGO): This increases the unit count per order, effectively doubling your sell-through velocity for those transactions without requiring double the traffic.
Managing seasonality and capacity manager
Amazon now allows sellers to "bid" for extra space using the Capacity Manager tool. You can request additional cubic volume in exchange for a reservation fee. If your sales generated from that extra space meet a certain threshold, you earn "performance credits" that offset the fee.
This is a gamble, but for seasonal sellers (e.g., selling pool toys in June), it is a necessary mechanism. However, relying on this consistently suggests a fundamental flaw in inventory planning.
The role of hybrid fulfillment (FBA + FBM)
Relying 100% on FBA makes you vulnerable to IPI fluctuations. A robust logistics strategy involves a hybrid approach.
By maintaining active FBM (Fulfilled by Merchant) offers alongside your FBA offers, you ensure business continuity. If Amazon restricts your storage limits due to a temporary IPI dip, you can continue selling via FBM using your 3PL partner.
This also protects your organic ranking. If you go out of stock at FBA because you hit a storage limit, your listing disappears, and your BSR (Best Sellers Rank) plummets. An FBM backup keeps the listing live and the BSR stable.
Long-term strategy for IPI maintenance
The IPI algorithm is not static; it evolves as Amazon’s network constraints change. The shift from unit-based limits to volume-based capacity limits highlights Amazon's focus on cubic efficiency.
High-volume, low-margin items are becoming increasingly difficult to sustain in the FBA model unless the turnover is extremely fast. Sellers must conduct a SKU-level profitability analysis that includes the "cost of space."
To future-proof your business, stop looking at inventory as just "stock on hand." Start viewing it through the lens of Inventory Velocity.
- Audit your catalog: Identify low-velocity SKUs that have not sold in 60 days and remove them from FBA.
- Shorten lead times: Work with 3PLs that can deliver to Amazon FBA centers within 24–48 hours, allowing you to run leaner stock levels without risking stockouts.
- Prioritize sell-through over margins: Sometimes, taking a lower margin to increase velocity is the smart move to protect your account's ability to restock its best-sellers.
Your IPI score is ultimately a reflection of supply chain discipline. By decoupling your bulk storage from your fulfillment center, you regain control over your metrics, ensuring that Amazon remains a sales channel, not a storage headache.
