Did you know that by having an Amazon inventory management strategy, you could save thousands in FBA fees and improve your product ranking at the same time? That’s why monitoring your inventory levels, sell-through rate, and storage fees isn’t just a routine task; it’s a profit move.
When sellers think of growing on Amazon, most focus on optimizing listings, boosting ad performance, or improving their PPC strategy. But what many overlook is how inventory management directly affects their ability to stay profitable and competitive.
Having an effective inventory management strategy could be the difference between a smooth cash flow and a profit-draining operation. Sellers who ignore it often end up paying Amazon unnecessary “rent” for unsold stock while running out of best-sellers that should be making them money.
In this article, our Amazon agency will discuss how the Inventory Performance Index score affects profitability and long-term success on Amazon. We’ll also share practical strategies to improve your inventory management, boost your IPI score, and keep your business running efficiently.
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Take Control of Your Amazon Inventory
Stop letting poor inventory habits drain your profits. Get a clear, data-backed strategy that keeps your IPI score healthy and your products moving.
What Is the Amazon Inventory Performance Index?
About 82% of active Amazon sellers use Fulfillment by Amazon to store, pack, and ship their products. With so many sellers relying on FBA, Amazon needs a system to ensure warehouse space is used efficiently.
That’s why the Inventory Performance Index (IPI) exists. It measures how well sellers manage their inventory and maintain the right balance between overstocking and running out of stock.
A higher IPI score (usually 400 or above) shows that you’re managing storage efficiently and keeping products moving. The better your score, the more storage capacity and flexibility Amazon gives you, without the extra restrictions or fees.
Breaking Down the 4 Key Components of Your Amazon IPI Score
There are key IPI components that sellers should be aware of to manage their inventory performance better. Understanding each component helps you identify what’s hurting your IPI score and how to fix it before it affects your profitability.
1. Excess Inventory
This measures how much of your inventory is sitting unsold for too long. Too much excess stock ties up your capital and storage space, lowering your IPI score and profitability.
2. Sell-Through Rate
This tracks how quickly your products sell over a set period. A strong sell-through rate means your inventory is moving efficiently, while a low rate signals slow-moving stock that may need pricing or ad adjustments.
3. Stranded Inventory
Stranded inventory refers to items stored in Amazon’s warehouse but not available for sale due to listing errors or policy issues. This hurts your IPI score since you’re paying for storage without generating revenue.
4. In-Stock Inventory
This component measures how often your popular, high-demand items stay in stock. Keeping these products consistently available boosts sales velocity and improves your IPI score.
Good IPI Score vs Bad IPI Score: How to Know Where You Stand
The IPI score helps sellers understand how well they’re managing their inventory, and it also helps Amazon determine who’s efficiently using warehouse space. To get a better handle on your business performance, knowing the difference between a good and a bad IPI score is key, so you can take action before it starts hurting your profitability.
Amazon uses IPI to decide how much FBA storage sellers are allowed and whether they will face extra fees for holding too much stock. A low score means you’re mismanaging inventory, while a high score shows that you’re maintaining healthy stock levels and moving products efficiently.
| IPI Score Range | Category | Meaning / Impact |
|---|---|---|
|
700 – 1,000 |
Excellent |
Strong sell-through and low excess stock; full storage access. |
|
500 – 699 |
Good |
Healthy inventory flow; minimal risk of limits or fees. |
|
350 – 499 |
Average / At Risk |
Inefficient inventory; monitor slow or stranded stock. |
|
Below 350 |
Poor |
High risk of limits and fees; act immediately. |
When Inventory Mistakes Cost You More Than Lost Sales
To maintain a healthy IPI and stay profitable, sellers need to manage their inventory with precision, yet many continue making small but costly errors that quietly eat into their margins, limit their storage capacity, and crush their ranking potential. Below are the most common inventory management mistakes Amazon sellers make:
1. Overstocking Inventory
Keeping too much stock might feel like a safety net, but it ties up your cash flow and racks up storage fees. Overstocking also drags down your IPI score since Amazon views it as inefficient use of warehouse space.
2. Running Out of Stock
Stockouts kill your ranking, lose the Buy Box, and drive customers straight to competitors. Every day your best-seller is unavailable, you’re not just losing sales, you’re also losing long-term visibility and keyword traction.
3. Poor Demand Forecasting
Guessing your demand instead of analyzing data is a fast track to overstocking or understocking. Without proper forecasting, you’ll never know when to restock or when to stop ordering.
4. Ignoring Seasonality and Events
Failing to prepare for Q4, Prime Day, or other major events leads to panic restocking and expensive shipping costs. Seasonal planning should start months ahead to align production and logistics with expected demand.
5. Inaccurate Inventory Tracking
Relying on spreadsheets or outdated systems causes inventory blind spots. You’ll either oversell what you don’t have or let profitable SKUs sit idle because your data isn’t updating in real time.
6. Holding Onto Dead Stock
Old inventory that isn’t moving is dead weight, which is literally costing you money to store. Liquidate, discount, or bundle those products before they destroy your profitability and sink your IPI score.
7. Failing to Monitor “Reserved” Inventory
Inventory stuck in “Reserved” or “FC Transfer” status can quietly tie up hundreds of units. If you don’t track and escalate these delays, you’ll face stockouts while your items just sit in transit limbo.
8. Poor Product Selection
Choosing bulky, slow-moving, or low-margin products can create a nightmare for your cash flow. Every oversized or underperforming item eats up space that should go to your profitable SKUs.
9. Neglecting FBA Prep and Labeling Standards
Incorrect labeling, poor packaging, or missing prep steps can delay check-ins or, worse, get shipments rejected. Every delay pushes your restock timeline further, which directly impacts sales and ranking.
10. Being Reactive Instead of Proactive
Many sellers only fix problems once they’ve already lost sales or hit restock limits. A proactive inventory management plan, backed by data, forecasting tools, and a steady reorder rhythm, keeps your business scalable and stress-free.
Boost Your IPI Score Fast
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Amazon Inventory Management Strategy: 10 Best Practices
Amazon sellers can create a solid inventory management strategy that maintains healthy stock levels, reduces fees, and improves their IPI scores. The key is to be proactive and strategic instead of constantly reacting to problems.
1. Plan Ahead Instead of Reacting
Waiting until you’re out of stock or overstocked is one of the most common mistakes sellers make. A proactive plan should forecast demand, account for seasonality, and prepare for supply chain delays before they become problems.
When you plan ahead, you give yourself time to restock smoothly and avoid expensive rush shipping or lost ranking. This consistency keeps your account metrics strong and ensures your IPI score remains steady.
2. Secure Financial Backing Early
Growth demands capital, especially when you need to increase production or restock quickly. Securing funding early, whether through Amazon Lending, business loans, or investors, gives you the flexibility to scale without interruptions.
Think of financial support as an investment in your brand’s growth, not just another expense. With enough capital, you can respond to spikes in demand without losing momentum or hurting your IPI score.
3. Strengthen Your Supply Chain
A reliable supply chain prevents stockouts, delays, and unnecessary costs. Partnering with dependable manufacturers and freight forwarders ensures your products move efficiently from production to Amazon’s fulfillment centers.
If your main supplier struggles to meet demand, consider dual sourcing or working with regional facilities. This kind of flexibility keeps your FBA inventory balanced and improves your sell-through performance.
4. Monitor Inventory Performance Regularly
Keeping an eye on your inventory metrics should be part of your weekly routine. Regularly tracking sell-through rates, stranded inventory, and excess stock helps you identify small issues before they grow into serious problems.
The sooner you notice a dip in performance, the faster you can take corrective action. Consistent monitoring directly contributes to healthier inventory levels and higher IPI scores.
5. Manage Excess Inventory Quickly
Excess inventory ties up your cash flow and increases your storage fees. When stock isn’t moving, consider flash sales, outlet deals, or wholesale offers to other sellers.
Acting quickly to clear slow-moving products improves your sell-through rate and storage efficiency. It also helps prevent your IPI score from dropping due to excess or aged inventory.
6. Don’t Ignore Stranded or Reserved Inventory
Stranded inventory can silently damage your IPI score if left unresolved. Always check your stranded listings for pricing errors, policy violations, or missing information that prevent sales.
If your inventory is stuck in “reserved” status due to FC transfers, open a support case. Regularly taking action shows Amazon that you’re actively managing your stock, which keeps your performance metrics in good shape.
7. Avoid Oversized and High-Cost SKUs
Starting with bulky or oversized products can kill your margins fast. Large items come with higher shipping and storage costs that eat away at your profits.
It’s smarter to begin with smaller, lightweight SKUs that turn over quickly and minimize risk. Once your operations mature, you can handle larger products strategically with better cost control.
8. Forecast Demand with Data
Guessing your restock timing often leads to lost sales or overstocked warehouses. Using Amazon’s data tools, historical reports, and Restock Inventory insights ensures your decisions are data-driven.
Accurate forecasting allows you to order just enough to meet demand without overcommitting capital. This precision strengthens your sell-through rate and keeps your IPI score stable.
9. Create a Clear Liquidation Plan
Every seller ends up with slow-moving products eventually. Letting them sit too long only increases storage fees and damages your IPI metrics.
Have a clear liquidation plan that includes removal orders, Amazon Outlet listings, or donations. Cutting losses quickly keeps your warehouse space free for products that actually sell.
10. Get Expert Help from a Full-Service Amazon Agency
Managing inventory efficiently requires time, data accuracy, and constant monitoring, something many sellers struggle to balance with everything else on their plate. That’s where expert help can make all the difference.
A full-service Amazon agency can design and execute a data-driven inventory management strategy that improves your IPI score and overall profitability. My Amazon Guy specializes in optimizing restocks, preventing overstocking, and refining operational processes so you can focus on scaling your brand with confidence.
Frequently Asked Questions
Don’t Let Poor Inventory Habits Drain Your Profits
When sellers think of boosting sales, they usually focus on ads, SEO, or product listings, not inventory management. But ignoring inventory can quietly damage profitability, hurt rankings, and trigger higher storage costs that eat into margins.
That’s why Amazon sellers should start treating inventory management as a growth strategy, not just a backend task. With this guide, we hope you now have a clearer understanding of how to manage your stock, maintain a healthy IPI score, and protect your profit potential.
Need help creating a solid Amazon inventory management strategy? Contact our full-service Amazon agency and let our experts develop a data-driven plan to keep your IPI score strong, your storage costs low, and your sales consistently growing.
Turn Excess Stock Into Profit
Don’t let slow-moving items eat into your margins. Our team can help you create a liquidation and restock plan that frees up cash and boosts sell-through.
