Mastering Amazon Inventory Management in 2025

Effective inventory management is crucial for success on Amazon. Maintaining optimal stock levels impacts sales, organic rankings, and advertising performance.

Amazon's programs penalize sellers for both overstocking and understocking. Mismanagement affects capacity limits, influencing how much inventory you can send to Fulfillment by Amazon (FBA).

This guide outlines key strategies for managing your FBA inventory effectively:

  • Understanding Capacity Limits & Inventory Performance Index (IPI)
  • Minimizing Storage Fees
  • Avoiding Low Inventory Fees

Capacity Limits and IPI Scores

Inventory Performance Index (IPI)

Amazon uses your IPI score to assess your inventory management. A low score restricts the inventory you can store in FBA warehouses. IPI is a rolling 12-week average based on:

  • Excess Inventory %
  • Stranded Inventory %
  • Sell-Through Rate
  • In-Stock Rate

Excess Inventory: Inventory exceeding a 90-day supply based on predicted demand. This significantly impacts IPI due to storage fees.

Stranded Inventory: Products unavailable due to listing issues, non-compliance, or errors. These incur storage fees while remaining unsold.

Sell-Through Rate: Units shipped in 90 days divided by the average on-hand units. This is key for forecasting optimal FBA inventory.

In-Stock Rate: Percentage of time products were in stock over 30 days. Maintaining a high in-stock rate minimizes lost sales.

Total Capacity Limit

Your total capacity limit is the maximum inventory you can store in FBA. Limits are reviewed and adjusted monthly. Sellers active for less than 39 weeks or on the Individual Seller Plan have different restrictions.

Your total storage usage includes:

  • Available Inventory: Sellable items ready to ship.
  • Inbound Units: Inventory shipped but not yet received.
  • Reserved Units: Units tied to pending shipments or undergoing processing.
  • Unfulfillable Inventory: Damaged, returned, or expired items.

Improving Your IPI Score

Monitor your IPI and capacity limits in Seller Central. Prioritize excess inventory and sell-through rate for maximum IPI impact.

Recommended Actions:

Excess Inventory:

  • Remove slow-moving or out-of-season items.
  • Consider promotions or advertising for slow-moving SKUs.
  • Optimize listings for better conversion rates.

Sell-Through Rate:

  • Prioritize FBA shipments of fast-moving items.
  • Use smaller, more frequent shipments.
  • Test small batches to validate sales velocity.

Stranded Inventory: Address stranded inventory regularly to free up storage space.

In-Stock Rate: While important, focus primarily on excess inventory and sell-through rate.

Allow 2-12 weeks for IPI improvements. Aim for an IPI 50 points above Amazon's minimum requirement.

Inventory Stock-Based Fees

Understanding Amazon's fee structure is vital for profitability. Storage fees, including monthly and long-term charges, can escalate with excess inventory.

Low Inventory Level Fee: Charged when inventory falls below a 28-day supply. This encourages maintaining sufficient stock.

Calculating Inventory Needs

Analyze 30- and 90-day sales velocity, historical data, and external factors to forecast inventory needs. Address excess inventory proactively.

Monitoring Inventory Matters

Active inventory management is essential for Amazon success. Regularly monitor sell-through rate and storage utilization to optimize performance and profitability.