Updated: Amazon Enters the 3PL Space with New Amazon Warehousing & Distribution Program

Update 11/03/2022: There have been questions about whether or not inventory will still be sent to FBA from AWD warehouses even if sellers are currently overlimit in their maximum restocking capacity.
Now, here’s the official and confirmed answer from Amazon themselves:

This screenshot was shared by our friend, Gianmarco Meli, Founder and Host at The Seller Process podcast, known for shorter-form episodes focused on actionable systems and processes to scale your eComm business. 🚀

Amazon may be a formidable player in the logistics space, but for years, they’ve also been one of the more expensive out there, especially during the holiday season when rates nearly triple for standard-size products.

For that reason, many sellers opt to outsource their bulk storage and distribution needs to third-party logistics companies (3PLs) that are typically more affordable than Amazon FBA.

🔥 Well, the game is about to get a little more interesting with the launch of a new low-cost logistics service called Amazon Warehousing & Distribution (AWD).

But looks can be deceiving, especially when you’re not comparing apples to apples. Is AWD really more cost-effective than your 3PL? It depends on your rates. Read on and then weigh your options. 

What is AWD?

It is a storage and distribution solution that gives sellers access to state-of-the-art logistics facilities and services without the hefty price tag that comes with Amazon FBA. Participation is currently by invitation only, so keep an eye out for Amazon updates.

Top features and benefits include:

• Auto-replenishment feature. To avoid stockouts, Amazon will automatically send additional units from AWD to their fulfillment centers (FCs). 
• No restock limits. This is huge because Amazon has just brought back restock limits! With AWD, however, you can circumvent this restriction and not worry about having to jump through a lot of hoops to stay in stock this Q4.
• Integrated supply chain. No need for 3PLs when you have a service provider that will take care of everything for you, from receiving your inventory to storage to distribution to fulfillment.
• Transfer inventory to Amazon and non-Amazon destinations. In 2023, the AWD program won’t just search Amazon warehouses, but can also replenish to other non-Amazon locations, including to fulfill brick-and-mortar stores.
• Pay As You Go Pricing. No hidden costs like early termination fees and only pay for services you use.
• Lower storage and processing fees. This is welcome news for sellers who have been cutting back on spending this year due to rising costs and increasing inflation. According to Amazon, they’ve made changes to their rate card to offer more competitive pricing. For example, based on the updated card rate below, it would only cost you around $24 (non-peak) to store one pallet of standard-size goods per month in AWD (versus FBA’s $47). A standard 40” x 48” pallet (plus 50” overall pallet shipment height) can hold 56 cubic ft, so multiply cubic ft by the current AMZ rate to get your monthly AWD storage fee.

Amazon Warehousing & Distribution Fees

Versus FBA Fulfillment Centers (February 2022 and after)

Cons of AWD

• You have less control over your inventory. Using AWD basically means turning over a boatload of products to Amazon and hoping that they don’t mess up, e.g., skip over your trailer, swap two trailers with different destination addresses, or lose your shipments. This is why it’s still best practice to have a backup 3PL for emergencies, especially during peak season.
• May not be cheaper than your local 3PL. While $24/pallet may be a savings for some sellers if paying over $20/pallet, that pricing is only between the months of January through September.
  
  Peak holiday storage, however, is where it could become more expensive than your average 3PL warehouse, with a standard 50” stackable pallet clocking in at close to $45 per month.
  
  Of course, that’s still much cheaper than the $133 per pallet equivalent that you’d be doling out at FBA from October to December.
  

You should also look at Processing and Transportation Fees when estimating the difference between using your current 3PL and AWD. If you’re paying $3.60 per carton/case in processing with your 3PL but AWD is offering $2.00 per case, that savings may be enough to offset the additional per pallet storage in peak season.

Of course, Amazon is also sweetening the pot with a waiving of restock limits for any of the inventory held within the AWD network. All these factors will have to be considered when determining whether AWD is right for you. 

Related: How to Ship to Amazon FBA (And Speed Up Check-In Times)

Is AWD Different from Amazon Upstream Storage?

In 2021, the eComm giant rolled out a low-cost bulk storage and distribution program for full container load (FCL) shipments called Amazon Upstream Storage (AUS). 

AWD and AUS share a lot of similar features like auto-replenishment, no restock limits, integrated supply chain, and lower storage costs, but the difference is that you don’t need full containers to use AWD. 

Amazon Continues to Add More Mega Warehouses

Despite posting a $3.8B loss due to excess storage and transportation capacity in Q1 2022, Amazon is still reportedly looking to add:

• A $300 million, 5-story, 3.1 million-square-foot distribution center in Niagara, New York
• A 5-story, 4.1 million-square-foot facility in Ontario, California
• A 5-story, 3.8 million-square-foot warehouse in Loveland, Colorado

If these plans push through, these 3 multi-million-square-foot warehouses would top among the biggest in Amazon’s entire network of 1,200 facilities in the US. 

As of this writing, the largest is a 3.6 million sq ft distribution facility in Mount Juliet, Tennessee.

⚠️ Amazon doubling down on its warehouse expansion plans is a strong sign that AWD is here to stay. 3PLs that are too small to beat Amazon may see themselves joining its vast distribution empire as a partner in the future, while others may struggle to keep their customers if they don’t offer more competitive rates.