What is IPI (Inventory Performance Index)?

What goes into the Inventory Performance Index

Amazon has described IPI as driven by a handful of inventory-health levers, and while Amazon adjusts the exact weighting over time, the core drivers have been consistent. The biggest one is excess inventory: stock sitting in fulfillment centers far beyond what your sales velocity justifies drags the score down. Aged inventory that is heading toward or already incurring long-term or aged-inventory surcharges hurts as well. Sell-through, the ratio of units shipped to units stored over a recent window, pushes the score up when it is healthy.

Two operational hygiene factors round it out. Stranded inventory, units sitting in the warehouse with no active, buyable listing, drags the score and should be fixed fast because those units cost storage while earning nothing. And in-stock rate on your productive listings matters, since running your best sellers out of stock signals poor inventory planning. Do not anchor to any specific numeric threshold you read anywhere, including the score floor, because Amazon changes these values; confirm the current threshold and your current score in Seller Central.

One structural point trips people up: IPI is weighted by inventory value and volume, not by SKU count. A single badly overstocked product can outweigh a dozen well-managed ones. That's why sellers with mostly healthy catalogs still get surprised by a falling score. The dashboard shows you a number for the account, but the problem almost always lives in two or three specific SKUs, and the excess inventory report is where you find them.

• •Excess inventory: too much stock relative to sales velocity lowers the score
• •Sell-through rate: healthy units-shipped to units-stored over a rolling window raises it
• •Stranded inventory: units with no active listing drag the score and waste storage
• •Aged inventory: stock approaching or incurring aged-inventory surcharges hurts
• •In-stock rate: running productive listings out of stock signals weak planning

Why your IPI score controls storage limits and fees

The practical consequence of IPI is storage capacity. When your score sits above Amazon's current threshold, you generally get unrestricted or very generous FBA storage. When it drops below, Amazon can apply storage limits that cap how many units, by storage type, you are allowed to have in fulfillment centers. Hitting that cap means you cannot send in more inventory, which can stall a product launch or a Q4 restock at the worst possible moment, and may force you to file removal orders to make room.

IPI also correlates with what you pay. The same behaviors that lower the score, excess and aged stock, are exactly the behaviors that trigger higher monthly storage fees and aged-inventory surcharges. So a low IPI is rarely a standalone problem; it usually means you are already bleeding money on storage. Improving the score and cutting storage cost are the same project. Both depend on knowing your real sell-through and real carrying cost, which is where accurate inventory accounting earns its keep.

The timing is what makes it dangerous. Limits are assessed on a schedule, and the score that matters for peak season is the one you carry into the fourth quarter, not the one you fix in November. A seller who lets excess pile up through the summer can find themselves capped exactly when they need to send in holiday stock, with no fast way out except removals that take weeks.

A worked example: how one SKU sinks the score

The numbers here are hypothetical, but the pattern is one you'll recognize.

Say you run three SKUs. SKU A sells 200 units a month and has 400 in FBA, about two months of cover, which is healthy. SKU C has 60 units stranded behind a suppressed listing. SKU B is the problem: it sells 20 units a month and you have 900 units sitting there, roughly forty-five months of cover from a single over-optimistic reorder.

Say storage works out to about $0.40 per unit per month at your item's size, before any aged-inventory surcharge. SKU B costs you $360 a month to store. At $6 of contribution margin per unit, SKU B earns about $120 a month. It is losing $240 a month before you count the surcharge that kicks in as those units cross Amazon's aging thresholds. Meanwhile it's dominating your excess-inventory metric and pulling the whole account's IPI down, so SKU A, your actual business, risks getting capped.

Now price the fix. Removing 700 units at a hypothetical $0.60 per unit removal fee costs $420. If your landed cost is $7 a unit, you relieve $4,900 of inventory and recover maybe $1,400 through a liquidator, so you book roughly a $3,920 loss including the removal fee. That number stings, but it isn't created by the decision. It's the recognition of value that already evaporated. What the decision actually buys you is $360 a month of stopped bleeding, an IPI recovery, and storage headroom for the SKU that works. Holding on for another year would have cost another $4,300 in storage plus surcharges and left you in the same place.

The lesson generalizes: the cost of a bad reorder isn't the write-down, it's the write-down plus every month you delay taking it.

How to improve a low IPI score

The fastest wins are usually on the cost-free hygiene items. Find and fix stranded inventory first, since reconnecting a listing or relisting units removes a drag and makes those units sellable again immediately. Next, attack excess and aged stock: discount slow movers, run a sale, or create a removal or liquidation order for units that will never sell through, accepting a small loss to stop the storage bleed and lift the score. Then tighten your in-stock rate on the listings that actually drive your sales.

Sequence matters more than effort. Fixing stranded units is free and takes an afternoon. Discounting costs margin but recovers cash. Removals cost fees and crystallize a loss. Work in that order, and give each step a few weeks to register, since IPI moves on a rolling window rather than instantly. Panic-liquidating everything at once is how sellers turn a scoring problem into a cash problem.

The durable fix is upstream: order quantities that match real demand. Overbuying is the root cause of most low IPI scores, and it is a planning and cash-flow problem before it is an Amazon problem. Using accurate sell-through and reorder math, rather than gut feel, keeps inventory lean enough to protect both the score and your margin. A clear view of unit-level cost and aging, the kind BeanHawk surfaces from your inventory and settlement data, makes those reorder and liquidation decisions far less guesswork.

IPI and the accounting view of inventory

IPI is Amazon's operational scorecard, but it maps almost one-to-one to inventory concepts your accountant cares about. Excess and aged inventory on Amazon's dashboard is the same slow-moving and obsolete stock that should be watched for write-down on your balance sheet. The storage fees and aged-inventory surcharges that a low IPI signals are real carrying costs that erode gross margin. And the removals you file to lift a sagging score are inventory leaving the system that must be relieved from stock at cost.

Get the bookkeeping right on each of those events. Storage fees and surcharges are period expenses, not part of inventory value, so they hit the P&L in the month Amazon charges them. Removal and disposal fees are expenses too. Units physically removed come out of your inventory asset at their landed cost, and if they're headed for liquidation at a fraction of that, the difference is a write-down you recognize when you know the value is gone, not when the cash finally arrives. Liquidation proceeds come back as a separate line rather than as ordinary sales revenue.

These charges arrive buried inside settlement reports, which is why they're so easy to miss. Solid amazon fba accounting breaks a settlement into its components (sales, referral fees, fulfillment fees, storage, surcharges, removals, reimbursements) instead of booking the net deposit as revenue. Do that and your storage line becomes visible enough to alarm you at the right time.

Treating IPI purely as an Amazon metric and ignoring its accounting twin is how sellers end up surprised by thin margins. If your IPI is chronically low, your books will show it as rising storage expense, growing aged stock value, and shrinking gross margin per unit. Reading both together gives you the full picture: IPI tells you Amazon is unhappy, and your P&L tells you how much it is costing you.

Common IPI mistakes

The last one causes most of the damage. A SKU that sold 400 units in December does not sell 400 units in February, but reorder math built on a holiday month will keep buying as if it does, and by summer you're paying storage on the difference.

• •Watching the account score instead of the excess-inventory report that shows which SKUs cause it
• •Ignoring stranded inventory because the unit count looks small, when it's free to fix
• •Sending a large restock without checking current storage limits first
• •Waiting for the score to recover before liquidating, rather than the other way around
• •Booking storage fees into COGS instead of treating them as period carrying costs
• •Carrying dead stock at full landed cost on the balance sheet long after it stopped being worth that
• •Setting reorder quantities from last quarter's peak rather than trailing average velocity

The reporting that keeps IPI healthy

You can manage IPI from Seller Central alone, but you'll be reacting rather than planning, because Amazon shows you units and a score without showing you the money. What you actually want in front of you each month is days of cover per SKU, trailing sell-through, aging buckets, and the carrying cost of the stock in each bucket. Amazon inventory management software handles the units-and-velocity half and can trigger reorders before you stock out on the products that deserve it.

The money half belongs to your ledger. Accounting software for amazon sellers should attach landed cost to each unit, release it to COGS as sales happen, and post settlements to QuickBooks or Xero as balanced summary journals so storage fees and surcharges appear as their own lines rather than vanishing into a net deposit. A2X and Link My Books cover the settlement mapping well. QuickBooks for Amazon sellers works fine as the ledger underneath either. BeanHawk adds per-SKU inventory valuation and aging to that picture. If you sell one or two SKUs, a spreadsheet updated weekly is genuinely enough, and the software only starts paying for itself when you can no longer hold every SKU's velocity in your head.

Frequently asked questions

What is a good IPI score?

Amazon sets a minimum threshold above which you get generous or unlimited FBA storage, and that threshold has changed over time, so check the current number in Seller Central rather than relying on a figure quoted elsewhere. Generally, the higher and more stable your score, the safer you are from storage limits. Aim to stay comfortably above the current floor so a normal restock does not push you over a cap.

What happens if my IPI score is too low?

Amazon can apply FBA storage limits that cap how much inventory you may hold by storage type. If you hit the cap you cannot send in more units, which can stall restocks and launches, and you may need to file removal orders to free up space. A low score usually also coincides with higher storage fees and aged-inventory surcharges.

How often does Amazon update the IPI score?

Amazon recalculates IPI on a rolling basis and displays the current score and a trend in Seller Central. Because it reflects recent inventory behavior, fixing stranded inventory or clearing excess stock can move the score over the following weeks rather than instantly. Check it regularly, especially before a big inbound shipment.

What is the fastest way to raise my IPI?

Start with stranded inventory, since reconnecting or relisting those units removes a drag immediately and makes the stock sellable again. Then reduce excess and aged inventory by discounting or liquidating slow movers, and keep your top listings in stock. The lasting fix is ordering quantities that match real demand so you stop overbuying.

Does IPI affect my storage fees directly?

IPI does not set fee rates by itself, but the behaviors that lower it, excess and aged stock, are exactly what triggers higher monthly storage fees and aged-inventory surcharges. So a low IPI almost always means you are already paying more in storage. Improving the score and cutting storage cost are effectively the same effort.

Should I liquidate inventory just to raise my IPI?

Only when the unit economics already say so. Run the numbers first: if a SKU's monthly storage cost plus expected surcharges exceeds the contribution it generates, and honest sell-through says you're years from clearing it, liquidation is the right call and the IPI lift is a bonus. Liquidating a merely slow but profitable SKU to chase a score is a bad trade.

How do I record removal and disposal fees in my books?

Removal, disposal, and liquidation fees are period expenses on your P&L. The units themselves come out of your inventory asset at landed cost when they physically leave, and any shortfall between that cost and what you recover is a write-down recognized when the value is clearly gone. Liquidation proceeds should sit on their own line rather than mixing into product sales, or your gross margin will look better than it was.

What software helps manage inventory health and the accounting behind it?

Split the job. Amazon inventory management software tracks units, velocity, days of cover, and reorder points. On the money side, look for a tool that carries landed cost per SKU, books COGS as units sell, and posts settlements into QuickBooks or Xero as balanced summary journals so storage and surcharge lines stay visible. A2X and Link My Books are the common settlement connectors; BeanHawk covers that plus inventory valuation and aging. Compare them on how they handle inventory costing, not just fee categorization.

Related terms

Go deeper

• Amazon Storage Fees: How FBA Charges Work and How to Cut Them
• Ecommerce Inventory Management: Quantity, Value, Reorder Points