Hey there! As an experienced Amazon seller, I know how frustrating and confusing setting up warehousing and shipping can be when starting out. You want to focus on growing your business, not become a logistics expert!
The good news is you‘ve come to the right place. In this detailed guide, I‘ll share my insider knowledge to help you fully understand Amazon‘s warehousing programs. With the right fulfillment approach, you can save time and money while wowing customers with fast Prime delivery.
Let‘s dive in!
Demystifying Amazon Warehousing 101
So what exactly is Amazon warehousing? Simply put, it‘s the behind-the-scenes infrastructure that enables Amazon to store and ship millions of products each day. As a seller, you can leverage Amazon‘s vast network of fulfillment centers instead of managing your own warehouses.
There are two main options:
- Fulfillment by Amazon (FBA) – Amazon stores your inventory and handles picking, packing, and shipping your orders. You pay fees for storage space and per order fulfilled.
Amazon Warehousing & Distribution (AWD) – Expanded storage-only program for products not eligible for FBA. You handle order logistics but can use Amazon warehouses.
Both options allow you to scale quickly, lower fulfillment costs, and provide Prime delivery speeds. Now let‘s look at how it all works.
An Inside Look at Amazon‘s Warehousing Operations
With over 175 fulfillment centers globally, Amazon has built one of the most sophisticated warehousing networks in the world. Their systems are optimized to rapidly process orders 24/7 by seamlessly coordinating:
- Receiving – Products are checked in and shelf-ready packaging is applied if needed. Inventory levels are updated.
Storage – Algorithmically assigned storage bins based on dimensions, weight, turnover rate and seasonal demand. Racks can autonomously move for picking efficiency.
Picking – Employees and robots select items from inventory to fulfill orders. High volume products are placed near packing stations.
Packing – Products are repacked based on Amazon‘s box optimization software to eliminate wasted space.
Shipping – Packages are rapidly sorted and shipped via Amazon or 3rd party carriers for fast region-based delivery.
This streamlined operation minimizes touches to reduce costs and speed up order processing. Now let‘s explore why thousands of sellers leverage it.
The Benefits of Outsourcing Fulfillment to Amazon
Here are some of the biggest ways using FBA and Amazon warehousing services can benefit your ecommerce business:
Bypass Size and Weight Limits
FBA restricts inventory dimensions and weights, but AWD removes these restrictions so oversized products can be stored. This added flexibility is ideal for large or bulky items.
Increased Storage Capacity
Amazon‘s vast warehouse capacity means you can store far more inventory than fitting in your own limited space. No more turning away orders due to lack of stock.
Easily scale up inventory during peak sales times. Amazon‘s infrastructure handles holiday orders and Prime Day volume surges with no additional investment needed on your part.
Reduced Overhead Costs
Amazon‘s economies of scale significantly lower fulfillment overhead. There‘s no need to lease, staff and manage your own warehouse facilities.
Faster Shipping Times
Prime members get free 1-2 day delivery on FBA orders, which increases customer satisfaction. Amazon‘s warehouses are optimally located near population hubs for quick region-based distribution.
Enhanced Metrics & Reports
Make data-driven decisions using Amazon‘s extensive warehouse reports on inventory levels, storage usage, picking errors, peak season preparedness and more.
More Time To Focus on Growth
Outsourcing logistics to Amazon lets you focus on designing great products, marketing them, and growing your business rather than becoming an expert in warehousing.
For most businesses, the benefits outweigh the costs of Amazon‘s fulfillment fees. But it‘s smart to run the numbers for your specific products and order volumes.
How the Amazon Warehousing & Distribution Program Works
In 2022, Amazon launched its Amazon Warehousing and Distribution (AWD) service to provide expanded storage beyond FBA‘s restrictions. Here‘s an overview:
- Separate Inventory – AWD inventory must be completely separate from your existing FBA products. This prevents co-mingling.
Expanded Eligibility – AWD accommodates oversized, hazardous, perishable and other products not allowed in FBA centers. Almost any physical product can be stored.
Pay-as-You-Go – Only pay for the storage space actually used instead of FBA‘s monthly fees. There are also handling fees per unit.
Seller Handles Logistics – You are responsible for coordinating transportation of orders to/from AWD facilities and customers.
For lower volume sellers, AWD provides more affordable long-term storage compared to FBA. Now let‘s go over what types of products Amazon will and won‘t store.
Amazon Warehousing Product Eligibility and Restrictions
Not all products qualify for Amazon fulfillment services. FBA and AWD have guidelines around:
Product Size Limits
- FBA size cannot exceed 50 lbs and 130" for the longest side.
- AWD has no set size restrictions but very large/heavy inventory may not be accepted.
Dangerous Goods and Hazmat
- Batteries, flammable liquids, pressurized items, etc. are prohibited from FBA but some can be stored via AWD.
- FBA products must have a shelf life of 90+ days upon receiving into the warehouse.
- FBA prohibits products needing refrigeration, special packaging, or extra labor to handle. AWD accommodates more complex logistics.
Carefully review FBA‘s detailed restricted products list before sending inventory. AWD provides more flexibility but approval is still required.
Calculating the Costs of Amazon Warehousing
While outsourcing fulfillment reduces logistics overhead for your business, Amazon charges fees to store and ship your products. Here are the main costs to factor in:
FBA Storage Fees
- Based on volume (cubic feet) stored by product category. Rates increase during Q4 peak.
Range from $0.48-2.35 per cubic foot depending on product size tier.
Long-term storage fees kick in after 6 months.
FBA Fulfillment Fees
Based on unit weight/dimensions. Charged each time an order is fulfilled.
Varies from $1.99 per small envelope to over $75 for extra-large items.
AWD Storage and Handling
Only pay for actual storage space used per month. Rates vary by warehouse.
Additional handling fees are charged per unit for intake, storage, picking.
Inbound and Outbound Shipping
You must arrange and pay for shipping inventory to/from Amazon fulfillment centers.
Amazon partners can provide discounted shipping rates.
Check Amazon‘s fee schedule and run volume projections to calculate if fulfillment costs pencil out profitably for your business.
Inventory Management Tips and Best Practices
To optimize your inventory and Amazon warehousing strategy, keep these tips in mind:
- Test new product integration by fulfilling sample orders first. Confirm units are tracked correctly.
Discuss allocation between FBA and AWD with Amazon reps based on demand, seasons, and capacity planning.
Maintain separate inventory listings and SKUs for units stored in AWD vs FBA.
Use a multi-channel inventory management software to sync stock levels between Seller Central and other sales channels.
Schedule cycle counts for regular inventory audits. Reconcile any discrepancies immediately.
Analyze storage usage reports to identify dead stock that should be removed to free up capacity.
Proper inventory accounting and optimization helps maximize profitability and minimize costs as your products flow between Amazon‘s warehouses.
Is Amazon Warehousing Right for You? Key Questions to Consider
Deciding whether to leverage FBA, AWD or handle fulfillment in-house depends on your specific business needs. Ask yourself:
- What is your current and projected order volume? For high volumes, FBA streamlines picking and shipping. Under 75 orders per day may be more affordable to handle yourself.
How much space do you need? Amazon has virtually unlimited capacity to accomodate inventory spikes. Pay only for the room you use.
Do you sell internationally? FBA has global fulfillment centers to support multi-country delivery.
How complex is your supply chain? Let Amazon‘s logistics experts handle compliated warehousing and shipping so you can focus on your core business.
How tech-savvy are you? Taking advantage of Amazon‘s tools and integration requires some comfort with technology. If not, consider hiring a specialist.
What are your fulfillment costs now? Compare to FBA and AWD fees to determine potential cost savings.
Considering these key factors will help you decide if Amazon warehousing is the right logistics solution for your ecommerce business‘s needs and stage of growth.
Work Smarter With an Experienced Amazon Account Manager
As an Amazon seller, I know juggling inventory, warehouse issues, and shipping complications is no fun. The good news is you don‘t have to figure it all out alone.
Having an expert Account Manager on your team provides:
- Action Plan to Optimize Warehousing – We‘ll analyze your inventory reports and operations to develop a customized logistics strategy.
Guidance on New Programs & Negotiations– I‘ll ensure you get enrolled in exclusive money-saving programs and get the best rates.
Ongoing Optimization – Monitoring tools help us continuously improve your inventory allocation, turnover, and occupancy.
Peace of Mind – Our team handles all the complex warehousing details so you can focus on growing your Amazon business, not just maintaining it.
Don‘t leave money on the table. With an Account Manager‘s help, you can build a smart Amazon warehousing and fulfillment strategy tailored to your specific needs.
You‘re Ready to Master Amazon Logistics!
Congratulations – you now have a complete overview of Amazon‘s warehousing programs and services.
The key takeaway: properly leveraging FBA, AWD and Amazon‘s fulfillment infrastructure allows you to save on overhead, boost Prime sales, maintain stock levels, and satisfy customers with fast shipping.
However, it does require understanding your options, costs, and how to integrate systems seamlessly. As your business grows, don‘t hesitate to tap into the expertise of an Account Manager. We can help avoid roadblocks and keep your ecommerce engine running smoothly.
Now that you‘re a warehousing pro, you can confidently choose the right fulfillment solutions and focus on the fun stuff – like expanding your catalog and blowing away customers! Ready to chat more about how we can help? Reach out anytime.