Amazon Warehousing and Distribution (AWD): Your Guide to Reducing Storage Costs

What Is Amazon Warehousing & Distribution Service (AWD) and How Does It Work?

Amazon Warehousing & Distribution (AWD) is a pay-as-you-go service that offers sellers low-cost, long-term storage. In essence, Amazon will store your inventory in their warehouses as they await to be delivered to fulfillment centers.

Here’s how Amazon AWD works:

Sellers send in their inventory to AWD warehouses either from their own 3PLs or directly from their manufacturers through Amazon Global Logistics. The inventory is stored in the warehouses until they are ready for shipment to FBA fulfillment centers (for FBA sellers) and to Amazon’s Multi-Channel Fulfillment Centers (for non-FBA sellers). The orders are then sent through the network until they reach customers.

AWD is especially useful to FBA sellers because the system automatically replenishes your stocks in the appropriate fulfillment center so you never run out of inventory.

How Do You Sign Up for AWD?

You can sign up to AWD by

• Going to the program page directly or
• Logging in to Seller Central, and clicking on the following: Seller Central at Growth →  Explore Programs → Warehousing and Distribution → Enroll

Do take note that there are certain AWD eligibility requirements you need to meet before you can enroll.

AWD Product Eligibility

There are products that are not eligible for AWD. So if you sell any of these, you can’t send them to AWD warehouses:

• Amazon devices
• Gift cards
• Grocery
• High-value products
• Jewelry
• Shoes
• Watches
• Apparel
• Perishables and products with expiration dates
• Dangerous goods
• Hazardous materials

Some products need to meet FBA requirements such as barcodes and specifics for those in the restricted product categories.

In addition, AWD has size requirements. Only the following are allowed:

AWD Seller Eligibility

In order to be eligible for AWD, you need to resolve all your issues with Amazon, specifically those related to your seller performance. You can learn more about how to do it through this page.

Should You Use Amazon Warehousing and Distribution?

As a general rule, if you and your products are eligible for AWD, using it as a long-term storage solution is beneficial in the long run. But as with anything else, you should actually do the math. In the following sections, we’ll show real examples from our brand where we determine how much you can actually save using AWD and when you should use it.

For now, let’s examine some of the reasons why you should use AWD, especially if you’re using FBA:

Avoid inventory stock outages. It affects both your revenue as well as brand image if customers are not able to purchase your products because of stockout. AWD eliminates this by allowing inventory replenishment automation from AWD distribution centers to FBA fulfillment centers. Buyers can still purchase your products even if the stocks are still at AWD warehouses and not yet at the fulfillment centers.

It’s cheaper than any 3PL. There are lots of third-party logistics providers in the US, but none of them offer lower rates compared to AWD. As of November 2023, the storage fee is $0.42 per cubic foot all year round.

Avoid more expensive FBA fees. FBA fulfillment centers are different compared to Amazon’s distribution warehouses. The former are meant for short-term storage only, to allow Amazon to pick and pack orders for your customers. That’s why FBA has more expensive storage fees. This means the longer your inventory sits on FBA, the more you have to pay. AWD fixes this by offering a cheaper temporary storage for your products while you wait for the others to be sold.

Pros and Cons of Using Amazon Warehousing and Distribution

How Much Does It Cost to Use Amazon AWD?

Enrolling in AWD is free. However, there are three main fees that you need to pay for:

As of writing, AWD’s storage fee is the same throughout the year, even during peak season when seller fees are usually higher. This can change, however. For example, before the uniform pricing, Amazon used to charge the following:

Is it cheaper to use AWD? In general, yes. It’s definitely cheaper than FBA storage fees that are currently at $0.87 per cubic foot per month (from January to September) and $2.40 per cubic foot per month (from October to December). This is why it’s a welcome addition to Amazon’s logistics network as it allows sellers to store their inventory long-term for cheaper rates and automatically replenishes stocks as needed.

Now, let’s take a look at some real-world data from our own brand to determine how much you can actually save using AWD. Here are the differences between storage fees in AWD and FBA for four of our products.

As you can see, there is a significant difference between the two. It’s unsurprising though since fulfillment centers are not really designed for long-term storage. In fact, all FBA sellers should strive to just have enough inventory ready for buyers in the fulfillment centers. Others should be stored elsewhere.

But how does AWD compare with other 3PLs? The following table shows the storage and processing fees of some of the most popular 3PLs in the United States.

They vary in pricing, but none of them are cheaper than what AWD is offering right now. This is why when the AWD program came out, it posed a threat to other 3PLs, especially for those who have many FBA sellers as clients.

How Do You Decide How Much Inventory to Send to AWD?

While AWD does offer lower storage fees, it’s still much cheaper to have just enough inventory sent to FBA fulfillment centers and not spend anything for long-term storage. So how do you strike the balance?

This is what we do in our own brands:

As a general rule, we keep 30 days’ worth of inventory in fulfillment centers and 60 days’ worth in AWD. The latter serves as a buffer for when we have a specially good month and sell more products than usual.

Meanwhile, we have two additional shipments on the water, each carrying a month’s worth of inventory and spaced enough to replenish stocks in time. It looks something like this:

The amount of inventory you send to any warehouse, of course, depends on the demand for the product. For our brands, we have a GSheet document that will tell us how long we can keep an inventory in AWD for it to still be profitable.

This sheet tells us how many months we can keep our products in AWD for us to break even and how much the AWD storage fees are compared to FBA. You can make a similar table like this to monitor your numbers.

The data we feed into this sheet are automatically pulled from Amazon so we don’t have to manually enter them. We discuss in detail how we make this sheet and other strategies we use to reduce our storage costs in EcomCrew Premium.