At our January 9 webinar, Brandwoven VP of Operations, Todd Phillips, walked through Amazon Warehousing and Distribution (AWD), how to leverage the program for cost savings, and which types of products would benefit from using it. As a fulfillment method that has grown in popularity this past year, more and more brands are considering whether utilizing the program will save them money and boost efficiencies in the long run.
What We Covered in the Webinar
- Introduction – what is AWD?
- Evaluate – when is AWD a good fit?
- Implement – how to manage AWD
- Projection – will AWD continue to grow?
Keep reading to learn more and visit the webinar page below to download your own copy of the slide deck and view the full presentation recording.
View Webinar Recording & Download the Slide Deck
Introduction to Amazon Warehousing and Distribution (AWD)
AWD is an Amazon warehousing and distribution solution that can replace 3rd party logistics providers for brands. Depending on the types of products a brand sells and whether they are already utilizing Amazon FBA for fulfillment, AWD may be a great option for cost savings. The program hasn’t been around for long, as it was in beta in 2024. The program is not going to be a good fit for every brand, but it may be a great fit for some – especially brands with high volume products and tight margins.
Where Amazon AWD Fits into the Supply Chain
There are a few different ways that brands may choose to utilize AWD in their supply chain:
- In between the 3PL and FBA
- Replacement of the 3PL
- In between the 3PL and Retailer
Benefits to Using Amazon AWD
The main benefit to using AWD is cost savings. Firstly, using AWD eliminates the inbound placement fee, which has been growing over the last year. The fee has become one of the primary reasons why brands are now exploring AWD as another fulfillment option. The program offers an even larger benefit if it’s used to completely replace the 3PL within a brand’s supply chain – eliminating a lot of the costs that go along with using one. Lastly, brands can significantly reduce expenses by lowering their FBA storage fees, using AWD as an FBA replacement (or in tandem). AWD has a better storage rate than FBA, creating a compounding cost benefit: more product in AWD = less product in FBA = less FBA fees that brands have to pay.
3 Risks to Be Aware Of
Although utilizing AWD might sound great, it does come with some caveats:
- Increased costs if not using the program for the right types of products
- Increased dependence on Amazon
- Manual oversight recommended at this stage of the program
Potential Increase in Costs
There may be an increase in costs for products that aren’t a good fit for the program. The way that the storage, processing, and transportation fees are calculated for AWD are different than that of FBA and other fulfillment methods. So, brands should ensure the products they choose to fulfill via AWD have a net positive.
Utilizing AWD to save costs depends heavily on whether it’s implemented the right way. For example, it’s important to note that while 3PLs handle packing, AWD does not. Prep is handled upstream – products need to be prepped prior to handoff. Also, AWD has a flat fee per box, so brands should aim to maximize each box by fitting in as much product as possible. Additionally, using Amazon transportation will unlock integrated rates at a discount – something that we often recommend to brands using the program.
Auto-Replenishment & Manual Oversight
Amazon AWD comes with an auto-replenish feature that sounds good – in theory. Since the program is still relatively new and many brands who are experimenting with it may be using it simultaneously with FBA, we recommend manual oversight of its automated decisions. As brands utilize AWD for longer and become more comfortable with its automation, they can choose to step back and allow the automation to handle everything, but for now we’re recommending at least some oversight to brands. Note, however, that this creates an operational change in how brands manage inventory and should be another consideration when choosing whether AWD is right for your Amazon business.
Products Ineligible for Amazon AWD
About 80% of products are eligible for AWD, with shoes and expiry-date products recently becoming eligible. However, there are 3 main product groups that are still ineligible for the program:
- Meltables: heat-sensitive and refrigerated goods
- High-Value: jewelry or other items in the thousands of dollars
- Unsafe: hazardous goods or large & bulky items that could be difficult for warehouse employees to handle
How To Implement Amazon AWD
To successfully implement AWD, brands should start with a forecast to project demand. From there, track existing layered inventory: how much product is already at AWD and/or FBA and how much product is already inbound? Pair this layered inventory with the forecast to determine how much additional product may be needed in each area. Lastly, we recommend setting rules based on variables like lead time and safety stock to determine if/when any more product needs to be purchased from the factory or transferred from FBA to AWD. From there, brands can intervene with manual movement if needed (like with the auto-replenish oversight we mentioned earlier).
When to Use Amazon AWD
The best-case scenario to use AWD is when it financially makes sense for a brand. To be more specific: when a brand’s products are eligible for the program, 3PL and inbound placement fees can be bypassed by using AWD, and when a brand is able to manage product prep upstream then they should seriously consider testing Amazon AWD as a fulfillment solution.
Brandwoven is continuing to track developments in AWD and evaluate its fit for each brand we partner with. We are confident the program will be a path forward for several brands to test in 2025.