Amazon Warehousing & Distribution (AWD): A Comprehensive Overview

Amazon Warehousing & Distribution (AWD): A Comprehensive Overview

Amazon Warehousing & Distribution (AWD) is a logistics service launched by Amazon in 2022 to help third-party sellers manage inventory more efficiently. In essence, AWD allows sellers to store products in Amazon’s warehouses at a low cost and have Amazon handle the distribution of that stock to various channels as needed. It was introduced to address common supply chain pain points – such as high storage costs, complex fees, and limited capacity – by providing “bulk inventory storage and automated distribution” through Amazon’s own fulfillment network. This service is part of Amazon’s broader strategy to offer “supply chain as a service” for sellers, leveraging Amazon’s extensive warehouse infrastructure to simplify seller operations and cut costs.

What Is Amazon AWD and How Does It Work?

Amazon AWD is essentially an upstream warehousing solution tightly integrated with Amazon’s fulfillment system. Sellers send their products in bulk to Amazon’s AWD storage centers, which are separate facilities designed for long-term storage and inventory management (distinct from the regular Amazon fulfillment centers that ship individual orders). Once inventory is in AWD, Amazon’s systems keep track of stock levels and will automatically replenish inventory to Amazon’s customer fulfillment centers (for FBA – Fulfillment by Amazon) whenever more stock is needed. This means that instead of manually creating shipments to restock FBA warehouses, sellers can let Amazon proactively transfer items from AWD into FBA, ensuring products remain in stock for orders.

Amazon’s proprietary models monitor inventory and trigger these moves so that sellers “always have the right amount of inventory in stock, in the right places and at the right times,” without worrying about FBA restock limits. In fact, any items in AWD with auto-replenishment are considered in-stock on Amazon because Amazon can swiftly route them to fulfillment centers for quick delivery.

Another key aspect of how AWD works is its support for multi-channel distribution. Sellers can use a single inventory pool stored in AWD to fulfill not only Amazon orders but also orders from other sales channels. In practice, this means Amazon will ship inventory from AWD to any destination the seller needs – for example, to other marketplaces’ fulfillment centers, wholesale customers, or even the seller’s own brick-and-mortar stores. Amazon officially rolled out this capability (called Multi-Channel Distribution, MCD) in 2023, allowing bulk distribution of products out of AWD to different channels on demand. By consolidating stock in one place and then redistributing it where needed, sellers can avoid splitting their inventory for each channel upfront. Amazon noted that maintaining one unified stock in AWD can reduce a seller’s overall inventory requirements by about 20% on average, since there’s less “safety stock” tied up separately for each channel and fewer stockouts occur. Sellers manage all these movements through their Amazon Seller Central dashboard – they can create inbound shipments to AWD, track inventory levels, and initiate transfers to Amazon fulfillment or external locations as needed, all in one interface.

In short, AWD works as a central hub for inventory: you send bulk goods to Amazon’s warehousing network, and Amazon takes on the heavy lifting of distributing that inventory optimally – whether that’s sending it to Prime fulfillment centers to fill customer orders, or forwarding it in bulk to other destinations. This eliminates the “time-consuming, cumbersome process of moving inventory from [external] upstream facilities to Amazon fulfillment centers” that many sellers historically managed themselves. With AWD, Amazon becomes your logistics partner upstream of order fulfillment, handling warehousing and transfers so you can focus on sales.

Key Features and Benefits of AWD

Amazon Warehousing & Distribution offers several notable features and benefits for e-commerce sellers:

Low-Cost Bulk Storage

AWD provides a cost-effective storage solution for inventory. It uses simple, pay-as-you-go pricing with no seasonal surcharges (no extra fees during the holiday peak). For example, standard AWD storage fees are around $0.48 per cubic foot per month, which can drop to roughly $0.43 per cubic foot with certain discounts (see “Smart Storage” below) – significantly cheaper than Amazon’s typical Q4 storage rates for FBA. This makes AWD ideal for long-term storage of products until they’re needed, avoiding the hefty costs of keeping excess stock in FBA centers during peak seasons. Moreover, AWD pricing covers Amazon’s inbound placement service by default, so sellers are not charged the usual fee for Amazon to route inventory to multiple fulfillment centers. In practice, that means you can send all your stock to AWD, and Amazon will distribute it internally as needed without additional placement fees.

Automated Inventory Replenishment

A standout feature of AWD is its auto-replenishment capability. When enabled, Amazon’s system will automatically transfer inventory from AWD storage into the appropriate fulfillment centers to keep your FBA stock at optimal levels. This automation saves sellers the effort of constantly monitoring stock and creating FBA shipments. It also helps prevent stockouts – your popular products won’t run out on Amazon because Amazon itself will proactively refill the pipeline. Notably, inventory moved via AWD auto-replenishment does not count against your normal FBA restock limits. This is a huge benefit for sellers constrained by FBA inventory caps, as it provides a way to keep more units effectively “in reserve” with Amazon until needed. Overall, auto-replenishment reduces manual work, keeps products in stock, and ensures Prime-ready availability with minimal oversight.

Multi-Channel Distribution

AWD isn’t just for Amazon orders – it supports multichannel inventory distribution. Sellers can fulfill orders across non-Amazon sales channels using stock in AWD, without maintaining separate warehouses for each channel. For example, you might use AWD to send a pallet of goods to your retail partner’s warehouse or to a third-party marketplace’s fulfillment service. Amazon’s Multi-Channel Distribution feature, introduced in 2023, lets you ship products in bulk from AWD to virtually any destination, complete with options like custom labeling for different retailers. The key benefit is having one pool of inventory that serves all channels, simplifying inventory management and reducing the total stock you need on hand. Amazon reported that sellers using AWD’s unified pool have seen about a 20% reduction in overall inventory requirements while still avoiding missed sales. By expanding to new channels from a central stock, sellers can grow their multichannel sales faster and more efficiently.

Simplified Operations & Integration

Because AWD is fully integrated into Amazon’s ecosystem, it greatly streamlines logistics operations for sellers. Enrolling is easy (just a few clicks in Seller Central) and there are no long-term contracts or complicated setup – unlike many traditional warehouse services. Once in AWD, sellers get unified visibility of their inventory through Amazon’s portal, seeing what’s in storage, what’s en route to fulfillment centers, and what’s been sent out to other channels. This end-to-end visibility and control in one platform improves supply chain transparency. Furthermore, Amazon’s handling of transportation means sellers no longer need to coordinate between separate third-party warehouses and Amazon – reducing the complexity of dealing with multiple logistics providers. Amazon leverages its vast transportation network and years of supply chain expertise to position products in the right warehouses at the right time. For sellers, this one-stop solution removes headaches like arranging freight, managing 3PL (third-party logistics) handoffs, and juggling different inventory systems. Everything flows through Amazon’s managed network, which is optimized for speed and cost-efficiency.

Scalability and Reliability

AWD offers Amazon’s legendary scale and operational reliability to sellers of all sizes. You benefit from Amazon’s economies of scale in warehousing and shipping – which often translate into lower costs and faster delivery than most individual 3PLs can offer. During busy seasons, Amazon can flex its capacity; in fact, Amazon noted it quadrupled AWD warehouse capacity in 2024 in the U.S. to meet the explosive demand from sellers. This means ample space is available when you need to stock up. Additionally, Amazon keeps AWD pricing consistent year-round, unlike some logistics providers that impose peak surcharges or require long-term commitments. Sellers have the flexibility to store inventory for as long as needed and scale their usage up or down without penalties, which is valuable for seasonal products or fluctuating demand. And because inventory in AWD can be quickly distributed to fulfillment centers, sellers can achieve very fast delivery promises (Prime speeds) once stock is pulled into FBA – helping maintain high seller performance and customer satisfaction.

Cost Savings

Ultimately, AWD can drive significant cost savings for many sellers. By using AWD as an upstream storage buffer, sellers can avoid the higher storage fees and long-term storage penalties that come with keeping excess units in FBA warehouses. They also save on costs of renting their own warehouse space or paying an external 3PL for storage and drayage to Amazon. Amazon touts that AWD’s simple pricing eliminates “complex pricing schemes and long-term contracts that are common throughout the 3PL industry,” giving sellers predictability and often lower overall costs. AWD also eliminates the FBA Inventory Placement fee (normally charged if you want to send all units to one warehouse for Amazon to distribute) by bundling that into the service. Moreover, Amazon has introduced incentive programs: for instance, a new “AWD Smart Storage” option provides a 10% discount on storage fees if you maintain sufficient inventory levels in AWD, bringing storage costs down to as low as $0.43 per cubic foot per month. And sellers using Amazon’s fully-managed supply chain service (where Amazon handles everything from factory pickup onward) receive even deeper discounts – in 2024 Amazon announced up to 25% off AWD storage fees and 15% off transportation fees for those fully-managed participants. All these savings add up.

How Does AWD Compare to FBA and Other Amazon Programs?

Fulfillment by Amazon (FBA) and Amazon Warehousing & Distribution (AWD) are complementary services, but they serve different stages of the fulfillment process. FBA is focused on order fulfillment: storing products in Amazon’s fulfillment centers ready for immediate picking, packing, and shipping to customers when orders are placed. AWD, on the other hand, is focused on inventory storage and allocation upstream of order fulfillment – it’s not directly shipping individual customer orders the way FBA does. Instead, AWD acts as a reservoir of inventory that feeds into FBA or to other outlets. In simple terms: sellers use FBA to deliver products to customers, and they use AWD to keep their FBA stock (and other channels’ stock) supplied without running out or paying too much for storage.

There are several key differences and points of comparison between AWD and FBA (as well as Amazon’s other logistics offerings):

Purpose and Workflow

With FBA, you typically send products to Amazon’s fulfillment centers, and Amazon handles the last-mile to customers. You have to plan how much stock to send in and when to replenish it. With AWD, you send a larger bulk of inventory into Amazon’s warehousing network, and Amazon itself will decide how to distribute it to fulfillment centers over time. AWD takes over the intermediate logistics of routing inventory. Essentially, FBA is for fulfilling customer orders one-by-one, whereas AWD is for storing and distributing inventory in bulk behind the scenes.

Multi-Channel vs. Single-Channel

FBA primarily services Amazon marketplace orders (though FBA stock can also be used for Multi-Channel Fulfillment of external orders). AWD is inherently multi-channel: it can send inventory to Amazon FCs and to other non-Amazon locations with equal ease. For example, if a seller also sells on their own website, they could either use FBA’s Multi-Channel Fulfillment (having Amazon ship each website order from FBA stock) or use AWD’s Multi-Channel Distribution (having Amazon ship a bulk quantity to, say, their own distribution center for online store orders). AWD’s approach might be more efficient for bulk wholesale or for staging inventory closer to other markets, while FBA/MCF is better for direct-to-consumer parcel fulfillment. Many sellers will use a combination: AWD to position inventory, FBA to fulfill individual orders, and possibly MCF for non-Amazon orders that are small scale.

Costs and Fees

FBA and AWD have different fee structures aligned with their roles. FBA charges fulfillment fees per order shipped (and monthly storage fees that surge during Q4 for on-hand stock). AWD charges storage fees and processing/transport fees for moving inventory, but no per-order fulfillment fee since AWD itself isn’t picking each order. In fact, one reason to use AWD is to avoid incurring FBA’s higher storage rates for slow-moving or excess inventory. Amazon explicitly notes that “AWD may lower your FBA costs” by offering cheaper storage and covering services like inventory placement for free. With AWD, you might pay something like ~$0.48/ft³ per month for storage plus small handling fees (around $1.35 per box) when inventory is sent in or out. With FBA alone, storage could be much higher in peak months, and if you sent inventory to FBA in bulk, you might incur placement fees or long-term storage fees for overstock. Thus, AWD is designed to be a cost-saving buffer before FBA. As of 2025, Amazon is also simplifying AWD’s fees (splitting inbound vs. outbound processing fees for transparency) and moving to distance-based transport fees for distributions, making it easier to compare costs.

Capacity and Limits

FBA often imposes inventory limits (restock limits or storage volume limits) on sellers based on their performance and warehouse space. AWD is a way to bypass those limits – inventory sitting in AWD doesn’t count toward FBA limits, yet can be pulled into FBA quickly when needed. In other words, a seller can keep a lot of stock in Amazon’s ecosystem via AWD without worrying about hitting their FBA cap; Amazon will drip-feed from AWD to FBA as space allows. This is particularly useful for large sellers or those with big seasonal spikes.

Integration with Supply Chain Services

AWD is part of the broader Supply Chain by Amazon initiative, which also includes Amazon Global Logistics (for international freight), the Amazon Partnered Carrier Program (for domestic shipping), FBA for fulfillment, Multi-Channel Fulfillment, and programs like Buy with Prime. Amazon’s vision is that a seller could use Amazon from the factory all the way to the customer: for instance, ship goods from a factory in China using Amazon Global Logistics, store them upon arrival in the U.S. using AWD, then fulfill orders via FBA or send bulk to other channels – all coordinated by Amazon. In 2024, Amazon went a step further by launching a fully-managed service where Amazon takes over forecasting and moving inventory through these stages automatically. Sellers simply supply product info and origin, and Amazon manages pickup, consolidation, warehousing (AWD), and replenishment into fulfillment centers optimally. This effectively turns Amazon into an end-to-end 3PL for the seller. By comparison, FBA by itself only begins when inventory is already in Amazon’s fulfillment center. AWD and the supply chain services fill in the gap before inventory reaches a fulfillment center. It’s a more expansive logistics offering, whereas FBA is one piece of the chain.

In summary, AWD complements FBA rather than replacing it. Think of AWD as Amazon acting as your primary warehouse and distribution network, and FBA as the retail store shelves where customers get their orders fulfilled. Sellers who adopt AWD typically still rely on FBA to handle the final delivery to Amazon shoppers (ensuring Prime eligibility and fast shipping), but they rely on AWD to maintain the flow of goods into FBA and to service other channels. This combination can streamline operations and cut costs versus using FBA alone or managing a patchwork of external warehouses. It also marks Amazon’s move into the domain of third-party logistics – effectively, Amazon is offering services much like an external 3PL would, but with deeper integration for Amazon sellers.

Recent Developments and Updates (2023–2025)

Amazon has been rapidly expanding and enhancing the AWD program since its launch, with new features and changes rolled out through 2023, 2024, and into 2025:

2023 – Multi-Channel Expansion

The promised multi-channel capabilities became reality. Amazon introduced Multi-Channel Distribution (MCD) for AWD, allowing sellers to ship inventory from AWD to “any location, including wholesale customers or brick-and-mortar stores.” This feature launched along with options like custom labeling for outbound shipments, making it easier to fulfill bulk orders for various sales channels. The focus was on letting sellers use one inventory source (AWD) to serve all channels, which, as noted, has helped sellers reduce total stock needs by about 20% on average while avoiding stockouts. By late 2023, AWD supported a wider range of product categories as Amazon continued to expand what types of FBA products are eligible for this storage service.

2024 – Capacity Growth and Full Supply Chain Integration

In response to high demand, Amazon scaled up its warehousing network for AWD significantly in 2024 – quadrupling AWD capacity in the U.S. This expansion meant more sellers could enroll and larger volumes could be accommodated, which was crucial as many businesses adopted AWD to mitigate supply chain challenges. In September 2024, Amazon announced the launch of a “Fully Managed” Supply Chain by Amazon service, which essentially ties all their logistics offerings (including AWD) into a cohesive, automated solution. With this option, Amazon takes charge of end-to-end inventory movement: from picking up inventory at a factory or port, to storing it in AWD, to replenishing fulfillment centers and even managing optimization via analytics. Sellers using the fully-managed service qualified for integrated discounts on AWD fees – Amazon reported a 25% storage fee reduction and 15% cut to transportation costs for these sellers. By making supply chain execution “as easy as pushing a button,” Amazon aimed to boost delivery speed (and indeed claimed that the improved delivery speeds were increasing sellers’ sales by an average of 20%). These developments positioned AWD not just as a standalone service but as a core component of Amazon’s end-to-end logistics solution for sellers.

2025 – New Pricing Options and Efficiency Tweaks

Going into 2025, Amazon announced refinements to AWD’s pricing and programs to further incentivize use and transparency. One major update was the introduction of a formal “AWD Smart Storage” tier – sellers who keep adequate stock levels in AWD will receive a 10% discount on storage fees, bringing the rate down to about $0.43 per cubic foot per month. (This essentially rewards sellers for utilizing AWD consistently and helps Amazon ensure inventory availability.) Another change was the simplification of processing fees: previously, AWD had a combined handling fee for inventory movements, but effective April 1, 2025, Amazon split this into separate inbound and outbound processing fees. The goal is to make costs more transparent and allow sellers to see what they’re paying for sending inventory into AWD vs. shipping it out. Additionally, Amazon shifted the Multi-Channel Distribution outbound shipping fees to a distance-based model in 2025, so the cost of delivering inventory from AWD to an external location will depend on distance (shorter hauls costing less, longer distances more). This change aligns costs more closely with actual shipping expenses and can reduce fees for nearby distributions. By 2025, Amazon also highlighted that AWD had improved its speed and accuracy of replenishing FBA inventory and continued to onboard more product types, making it a more robust service for all kinds of sellers. In sum, the 2025 updates are about fine-tuning the economics of AWD to be even more attractive and scalable as the program matures.

Throughout these years, Amazon’s investment in AWD reflects its strong commitment to building out a truly end-to-end logistics offering. Thousands of sellers have adopted AWD (Amazon indicated that hundreds of thousands of sellers now use at least one Amazon supply chain service), and Amazon’s own operational data guided these expansions and tweaks. The result as of 2025 is that AWD is a far more capable and feature-rich service than when it first launched – it now handles global shipments, multiple channels, and integrates into Amazon’s full suite of seller services. All these developments underscore Amazon’s strategy of enabling sellers to outsource as much of their supply chain as they want to Amazon.

What AWD Means for Sellers and 3PL Providers

For e-commerce sellers, Amazon Warehousing & Distribution (AWD) can be a game-changer. It offers both small and large sellers access to Amazon’s world-class logistics network on a pay-as-you-go basis, delivering significant cost and operational efficiencies that might be difficult to achieve independently. By using AWD, sellers can substantially reduce their storage costs, as there is no need to pay for expensive warehouse space or store idle stock in FBA. AWD also simplifies logistics by allowing Amazon to handle inventory transfers and replenishments across various sales channels, letting sellers focus on their core business – product sourcing, marketing, and customer engagement.

This results in operational savings, as sellers no longer need to manage complex inventory movements between various warehouses, fulfillment centers, or other third-party logistics providers. With Amazon managing those processes through AWD, sellers benefit from faster, more reliable inventory movement, cutting down the time spent handling logistics. The auto-replenishment feature within AWD ensures that inventory remains stocked in Amazon’s fulfillment centers without the seller needing to manually trigger stock moves, which can help prevent stockouts and improve overall delivery speed. The reliability and speed of Amazon’s supply chain – which also includes rapid restocking and inventory management – means sellers can maintain higher in-stock rates and meet faster delivery promises, directly contributing to customer satisfaction and improved sales.

Moreover, AWD provides sellers greater flexibility and scalability. They can expand into new geographic regions or sales channels without having to invest in new distribution centers. Since Amazon’s infrastructure can handle all the logistics, sellers can avoid the complexity and costs of establishing operations in new locations or managing separate fulfillment processes for different channels. AWD allows sellers to leverage Amazon’s logistics network to distribute inventory to physical stores, wholesale customers, or even international markets. As a result, sellers can operate with the capabilities of a much larger company, leveling the playing field against industry giants. However, sellers should be mindful that relying heavily on Amazon for so much of their supply chain means putting a significant amount of trust – and risk – into one provider. While the convenience and cost savings are clear, sellers should assess how much control they’re willing to relinquish over their logistics processes.

In this evolving landscape, it’s important to note that while AWD offers many benefits, some third-party logistics providers (3PLs) might still offer a cheaper and better storage solution for certain businesses. Traditional 3PLs can be more flexible when it comes to pricing, particularly for sellers who have more complex logistics needs or who require additional services, such as kitting, custom packaging, or handling specialized inventory that Amazon won’t store. In some cases, 3PLs may provide better storage options for specific types of products (such as perishable goods, oversized items, or hazardous materials) that AWS doesn’t accommodate as efficiently. 3PL providers can also offer more tailored warehousing solutions and may allow for greater inventory flexibility, particularly for businesses that don’t have enough inventory to justify a fully-managed service like AWD. Sellers should weigh the pros and cons of using AWD versus a traditional 3PL service, especially when it comes to cost, flexibility, and storage capabilities.

For third-party logistics (3PL) providers, Amazon’s entry into warehousing and distribution represents a major competitive threat and a shift in the industry landscape. Traditionally, many Amazon sellers used 3PLs to store overflow inventory and handle distribution to Amazon’s fulfillment centers or other sales channels. With AWD, Amazon is effectively inviting sellers to bring that business in-house, leveraging Amazon’s scale and integrated technology to handle these operations within its ecosystem. Services typically offered by 3PLs, such as storage, inventory management, inter-warehouse transfers, and forwarding to retail partners, are now increasingly available within Amazon’s network, often at competitive rates and with the added benefit of seamless integration.

As a result, independent 3PLs face challenges competing on price and speed. Amazon’s massive infrastructure and consistent pricing, with no seasonal surcharges, offer it a distinct advantage over many traditional logistics providers. Some industry observers argue that Amazon’s scale and ability to provide end-to-end logistics solutions, from warehousing to delivery, make it difficult for 3PLs to compete in the same way they once did. That being said, there may still be opportunities for 3PLs to carve out niches in this evolving landscape. Not all sellers will want to use AWD for every product. For instance, those selling on multiple marketplaces might still need a 3PL to handle multi-platform fulfillment or offer specialized services such as kitting, custom packaging, or handling products that Amazon doesn’t store.

Some 3PLs may also look to position themselves as complements to Amazon’s offering, focusing on areas where Amazon’s services are less comprehensive. For example, they could offer additional fulfillment capabilities or handle inventory that Amazon cannot store, while feeding that inventory into AWD for more efficient distribution. As Amazon’s logistics network expands, there may be more opportunities for 3PLs to cooperate with Amazon, potentially serving as a feeder for inventory into AWD or managing aspects of fulfillment that Amazon doesn’t directly cover.

Additionally, Amazon’s approach to logistics could lead to more outsourced opportunities. While Amazon has invested heavily in building its own infrastructure, the massive scale of demand might open subcontracting opportunities for third-party operators – similar to how Amazon collaborates with delivery service partners for last-mile delivery. In any case, 3PLs will need to adapt, focusing on value-added services like customizations, flexibility, and specialized fulfillment solutions that AWD does not offer. This could include managing specific customer requirements, offering extra services that enhance the Amazon experience, or integrating seamlessly into Amazon’s broader logistics ecosystem.

Amazon’s move into warehousing undeniably raises the bar for 3PL providers. They now face competition from one of the world’s largest logistics networks, which offers immense scale and the ability to optimize services across a vast infrastructure. For the 3PL sector, AWD underscores the importance of innovation and the potential for a more cooperative approach, where 3PLs manage aspects of fulfillment that complement and enhance Amazon’s network. Ultimately, as e-commerce logistics become increasingly integrated, AWS is at the forefront of this change, challenging all players – sellers and 3PLs alike – to evolve and meet the demands of an ever-more connected supply chain.

Racklify Vs AWD

When considering AWD, it's crucial for sellers to explore all of their 3PL options to ensure they are making the best choice for their business. While AWD offers several advantages, such as Amazon’s vast infrastructure and seamless integration, it may not always be the most cost-effective or flexible option, especially for businesses with unique inventory needs, specialized products, or those operating across multiple marketplaces. In these cases, a traditional 3PL might offer better pricing, more tailored services, and additional flexibility that AWD can't match.

This is where Racklify can help. As a marketplace designed to help merchants and 3PL providers connect without the usual lead fees or hidden costs, Racklify makes it easier for sellers to compare different 3PL options based on their specific needs. By leveraging Racklify’s platform, sellers can discover 3PL providers who offer the best pricing and services, ensuring that they find the right logistics partner for their business, whether they’re considering AWD or other alternatives. Exploring 3PL options through Racklify empowers sellers to make informed decisions and optimize their supply chain for maximum efficiency and cost-effectiveness.