Amazon Warehouse & Distribution (AWD) is transforming how sellers can manage inventory on Amazon. In this blog, we’re going to cover the pros, cons, and everything in between when it comes to using Amazon as a warehousing and distribution solution for your business.
What is Amazon AWD Exactly?
Amazon Warehouse & Distribution (AWD) is a third-party logistics service alternative to your everyday 3PL (3rd Party Logistics). You send your inventory “upstream” to the AWD fulfillment centers, and Amazon will then replenish your inventory in FBA when you reach a certain threshold.
Why Use AWD?
If you’re new to FBA or don’t have much of your own warehouse space for your goods, using a 3PL can be an attractive but, at times, costly solution. It’s important to shop around and evaluate which 3PL suits your business needs the best, whether it is Amazon AWD or another 3PL.
Amazon AWD (Amazon Warehousing and Distribution) offers an often cost-effective way to store large quantities of inventory with automatic replenishment to your Amazon FBA listings. This eliminates the need to manage your own warehouse and saves you money on storage fees, especially when dealing with bulk inventory, while also allowing you to distribute to multiple sales channels beyond just Amazon. Additionally, AWD replenishes inventory to FBA and other distribution channels. That means you can use a single pool of inventory to reach customers in and beyond the Amazon store.
Storage Fees: The average 3PL storage fee, typically charged per pallet per month, is around $10 – $30 depending on the 3PL provider and location, with some variations based on storage method (like cubic footage or bin storage). Amazon AWD can help you see some savings there if you don’t have your own warehousing facilities or you’re in the higher range of the fee structure.
According to available data, the average 3PL processing fee, or cost per order, is $3.18 for B2C orders, ranging from $2.50 to $5 per order, depending on the complexity of the product and services needed. There are additional fees for individual items, storage, and shipping costs factored in separately. B2B orders tend to have a higher average cost per order, at $4.79. Pricing depends heavily on the product type, order volume, required services (like prepping and labeling), and shipping distance and speed. Depending on these factors and order volume, many 3PLs can offer bulk discounts.
Things to Consider When Evaluating AWD for Your Brand:
Amazon AWD can currently offer warehousing and distribution to sellers in the following categories:
- Apparel (only single ASIN per box)
- Automotive and Powersports
- Baby Products
- Beauty
- Books
- Camera and Photo
- Collectible Coins
- Consumer Electronics
- Health and Personal Care
- Home and Garden
- Industrial and Scientific
- Major Appliances
- Music and DVD
- Musical Instruments
- Office Products, etc.
In addition to determining product eligibility, Amazon will also validate that the products that you are sending meet the following FBA requirements:
Restricted Product Categories: For certain categories, you’re required to get pre-approval from Amazon before you list your products. Review FBA guidelines to ensure that you’re eligible to sell products for these categories.
Stranded Inventory: Stranded inventory is when FBA inventory in fulfillment centers doesn’t have an active offer and isn’t available for sale on Amazon. When inventory is stranded, you must either reactivate the listing or remove the inventory. Before you send inventory to Warehousing & Distribution, you should resolve stranded inventory issues.
FBA Barcodes/FNSKU Labels: FBA uses barcodes to identify and track inventory throughout the fulfillment process. Whether it be manufacturer barcode (UPC) tracking or an Amazon X00 FNSKU, products require some kind of labeling. For some products, the UPC is permanently affixed to the product and no additional prep is needed, however if your products require an FNSKU label, each item that you send to a fulfillment center via Warehousing and Distribution must be labeled. You can print Amazon barcodes and apply them to your products yourself, or you can have Amazon print and apply them for a per-item fee.
Product Listing Issues: Product listings in the destination store must be valid before you send inventory to Warehousing & Distribution.
Missing Catalog Attributes: Product details must be provided accurately in the product catalog.
Seller Account Performance Issues: If there are any performance issues with your seller account or the item that you’re sending to Warehousing & Distribution, you won’t be able to send inventory. All issues must be resolved before you can send the product to Amazon.
This Sounds Great. Why Wouldn’t I Want to Use AWD?
With all the good that can come from using AWD, there are also some potential pitfalls you need to consider.
Storage Fees: Storage fees are common amongst all types of 3PLs and differ based on logistics solution provider and product type. These costs should be considered when deciding on a 3PL solution. On the 6th of the month, Amazon charges a monthly AWD storage fee for the space your inventory occupies in their distribution centers. AWD monthly storage fees are calculated by multiplying the applicable storage rate by the average volume that was used over the month for all stored boxes.
Calculation Example:
- Storage fee per cubic foot: $0.48
- Average storage volume for the entire month for a given shipment and FNSKU: 100 cubic feet
The storage fee is calculated as $0.48 x 100 = $48.
Lead Time: Amazon doesn’t house your AWD inventory in the same fulfillment centers they use for FBA. They need to create transfers (similar to transshipping) wherein inventory is removed from your AWD inventory, put on an FBA Shipment, and sent to an FC.
Auto-Replenishment uses a proprietary data science model to trigger replenishment to the FBA network. When the combined quantity of Available Inventory in the FBA network and Inventory in Transit to the FBA network falls below the optimum level of supply for a specific ASIN, the Auto-Replenishment will be triggered during the next scheduled replenishment cycle to ensure the ASIN does not go out-of-stock. Currently, the science model runs 7 days a week to monitor inventory in the FBA network and determine if an Auto-Replenishment shipment needs to be triggered.
Each seller ASIN will have its own optimal level. Additionally, the optimal level for an ASIN will fluctuate over time. If you’re using auto-replenishment this can lead to stockouts if you have a sudden spike in sales velocity or hit your peak seasonality. Even when not using auto-replenishment, there are no guarantees that your inventory will be shipped after a replenishment request has been placed.
Processing Fees: Processing fees are also common within 3PL providers, and range in price depending upon the products and services needed, order volume, and shipping location and speed. AWD Processing fees are charged when a replenishment order is successfully delivered to Amazon’s fulfillment network. The fee is calculated by multiplying the applicable processing rate by the number of boxes that were delivered as part of the replenishment order.
Calculation Example:
- Processing fee per box: $2.50
- Number of boxes that were delivered for the replenishment order: 10
The processing fee is calculated as $2.50 x 10 = $25
Starting April 1, 2025, the processing fee will be charged separately at the inbound stage when your inventory is received in an Amazon distribution center, and again at the outbound stage when a replenishment order is successfully delivered to Amazon’s fulfillment network.
Calculation Example:
- Processing fee per box (charged at inbound and outbound separately): $1.35
- Number of boxes received in AWD distribution center: 25
- Number of boxes that were delivered for the replenishment order: 10
The processing fee at inbound will be calculated as $1.35 x 25 = $33.75
The processing fee at outbound will be calculated as $1.35 x 10 = $13.50
Transportation Fees:
AWD Transportation fees are charged when a replenishment order is successfully delivered to Amazon’s fulfillment network. The fee will be calculated by multiplying the applicable transportation rate by the total volume of boxes in cubic feet that were delivered as part of the replenishment order to FBA.
Calculation example:
- Transportation fee per cubic foot: $1.15
- Total volume of the boxes in the replenishment order: 100 cubic feet
The transportation fee will be calculated as $1.15 x 100 = $115
Final Thoughts: Is AWD Right for Your Business?
Amazon Warehouse & Distribution can be a game-changer for sellers looking to streamline inventory management, reduce storage headaches, and leverage Amazon’s vast fulfillment network. However, it’s crucial to weigh the benefits against potential costs, including storage, processing, and transportation fees.
Before committing to AWD, analyze your business needs, run cost comparisons against other 3PL options, and consider how Amazon’s auto-replenishment model aligns with your sales patterns vs. your company managing replenishments yourself. With careful planning, AWD can be a valuable tool to help scale your eCommerce business efficiently.
If you need some guidance or an audit of your current process, reach out to our expert team and we can start looking at how to improve your business.
