How to Improve Your IPI (Inventory Performance Index): Practical Steps for Small Merchants

Improving your IPI (Inventory Performance Index) doesn't require advanced analytics or a large team. Small merchants and beginner warehouse teams can make meaningful progress with a few focused, practical actions. This article outlines friendly, step-by-step tactics that deliver fast results.

Start with a health check:

1. Review the IPI components. Break down the score into its parts—sell-through, excess, stranded, and in-stock metrics—so you know which area needs work.
2. Prioritize quick wins. Tasks like resolving stranded listings or addressing obvious pricing errors often restore sales quickly and improve the score.

Concrete actions to improve your IPI:

• Fix stranded inventory fast: Run a weekly report to find SKUs marked as unsellable or with listing issues. Common fixes include updating product identifiers, resolving compliance or documentation gaps, and correcting pricing or shipping settings.
• Reduce excess stock: Identify slow-moving SKUs and choose one of the following: create promotions or bundles, run targeted advertising to move inventory, offer quantity discounts, or place removal orders. Even small discounts can convert dead stock into cash.
• Improve sell-through with targeted marketing: Promote underperforming lines through email blasts, social media, or platform promotions. Prioritize SKUs that are low risk and easy to ship.
• Refine replenishment rules: Set reorder points based on recent demand rather than static guesses. If you sell seasonally, use seasonal min/max levels to avoid overbuying.
• Adopt basic forecasting: Use the last 3–6 months of sales as a simple forecast baseline, adjusted for known seasonality or promotions. Forecasts help you buy the right quantities and reduce excess inventory.
• Improve in-stock rates for top SKUs: Identify your top 20% of SKUs that generate most sales. Ensure replenishment priorities, safety stock, and supplier lead-time buffers are set higher for these items.
• Use cycle counts: Regular, small counts reduce inventory errors that can cause stockouts or misreported quantities. Monthly or weekly cycle counts for high-value SKUs are very effective.
• Optimize packaging and unitization: Better packaging and consistent SKU units reduce pick errors and returns. This indirectly helps keep items sellable and reduces stranded inventory.
• Coordinate promotions with supply: Avoid running heavy promotions unless you’re certain you can replenish quickly. Promotions that exceed replenishment capacity can lead to stockouts and longer-term lost sales.

Tools and processes that help:

• Inventory management software or WMS: Even simple systems provide alerts for low stock, slow movers, and expiring items.
• Automated reports: Set up weekly dashboards that show sell-through, excess days of inventory, and stranded SKU counts so problems are visible early.
• Supplier communication: Work with suppliers on lead-time visibility and flexible ordering. A supplier who can expedite small runs helps avoid overstocking.
• Basic analytics: Track metrics like days of supply and inventory turnover alongside your IPI so you understand root causes rather than symptoms.

Example improvement plan for a small merchant (30–60 days):

1. Week 1: Run a stranded inventory audit, resolve top 10 listing errors.
2. Week 2: Identify top 10 slow movers and create promotion or bundle plans.
3. Week 3: Implement replenishment rules for top-selling SKUs; set safety stock.
4. Week 4: Start weekly cycle counts for the top 50 SKUs; monitor sell-through.
5. Weeks 5–8: Repeat promotions for slow movers, refine forecasting, and monitor IPI changes. Adjust actions based on which component moves most.

Common pitfalls to avoid:

• Cutting prices indiscriminately: Deep discounts may move inventory but hurt margins. Prefer targeted promotions and bundles first.
• Ignoring data: Acting on hunches rather than sales and inventory reports often creates new problems.
• Fixing symptoms, not causes: For example, removing stock solves capacity issues but doesn’t fix a broken forecasting process that created the excess in the first place.

With modest effort and consistent weekly attention, small merchants can move their IPI in meaningful ways. The most effective approach combines operational fixes (resolving stranded stock and improving counts), demand-side actions (promotions and marketing), and smarter purchasing (forecasting and replenishment rules). Over time, those changes improve cash flow, reduce storage friction, and lead to a healthier, more sustainable business.