Inventory management has become a decisive battleground for Amazon FBA sellers. With warehouse space at a premium and storage restrictions tightening, sellers face mounting challenges in maintaining optimal stock levels while avoiding costly long-term storage fees.
The Inventory Performance Index (IPI) Challenge
Amazon's Inventory Performance Index (IPI) score determines a seller's warehouse allocation, with 400 being the critical threshold. Falling below this score triggers storage capacity restrictions - a predicament affecting 67% of Chinese sellers whose IPI scores fluctuate between 350-450. Amazon evaluates IPI scores quarterly (in February, May, August, and mid-November) to allocate storage capacity for the following quarter.
Key Statistic: According to Amazon's 2024 report, every 50-point increase in IPI score yields an average 18% boost in storage capacity.
The Dual Constraints: Volume and Quantity
Amazon imposes inventory limits through two primary mechanisms:
- Volume restrictions (measured in cubic feet)
- ASIN quantity limits
A seller with an IPI score of 350 selling standard-size items might receive only 500 cubic feet of storage space - enough for approximately 1,200 small-to-medium items. Conversely, scores of 450+ unlock full allocations, potentially providing tens of thousands of cubic feet. Amazon dynamically adjusts quotas before peak seasons (particularly Q4), with high-performing sellers eligible to request temporary increases through a 7-10 business day approval process.
Three Core Strategies for FBA Inventory Optimization
1. The IPI Breakthrough: Surpassing 400 Points
Improving IPI scores requires attention to four critical metrics:
- Reducing excess inventory (target: below 10%)
- Maintaining sell-through rate (over 85% of ASINs with sales in 90 days)
- Minimizing stockouts (below 4%)
- Eliminating inventory aged over 365 days
2. Dynamic Replenishment: Precision Forecasting
Effective inventory management requires calculating:
Safety Stock = (Daily Sales × Replenishment Cycle) + Buffer Inventory
For example, a product selling 50 units daily with a 35-day ocean freight lead time needs 1,750 safety stock units. Air shipment (15-day lead time) reduces this to 750 units. Advanced tools like Helium 10 or Jungle Scout can help maintain forecasting accuracy within ±15%.
3. Liquidation & Redistribution: Reviving Stagnant Inventory
For slow-moving inventory (90+ days without sales), consider:
- Outlet Deals (22%+ conversion rates)
- Multichannel Fulfillment (MCF) via Send to Amazon (STA)
These approaches help avoid long-term storage fees ($6.90/cubic foot/month after 180 days).
Frequently Asked Questions
Navigate to Seller Central → Inventory → Manage FBA Inventory → Storage Capacity Monitor. This displays remaining quarterly volume (updated daily). Maintain 20% buffer capacity.
While direct appeals aren't possible, sellers near 400 IPI can submit Business Growth Plans (30-40% approval rate) demonstrating sales forecasts and turnover strategies.
Fees apply at $6.90/cubic foot/month (181-365 days) and $33.60/cubic foot/month (365+ days). Monthly inventory age reports help identify at-risk SKUs for liquidation.
Returns cost ¥8-12/kg (including duties) and suit high-value items. Disposal ($0.15-0.50/unit) works for low-value stock but may impact account health if overused.
Initial shipments should equal 21 days of projected sales. The FBA Small and Light program (for items ≤$15 and ≤1lb) reduces commission to 5.5-8.5% for testing new products.
The Future of FBA Inventory Management
As Amazon continues refining its IPI algorithms, sophisticated inventory management will separate successful sellers from the competition. Those mastering these techniques will secure sustainable advantages in Amazon's marketplace.