With AWD, Amazon is introducing 'supply chain as a service'

Amazon is set to introduce a service for third-party sellers: Storage.

At a time when many brands and retailers continue to face supply chain issues, Amazon Warehousing & Distribution (AWD) is set to provide sellers with space to store bulk inventory.

Amazon said it is making new facilities available for the program, where sellers can store goods that are awaiting the move into position for ordering and shipment. From these facilities, the inventory can then be tapped to automatically replenish supplies at Amazon's fulfillment centers, where orders are packed and shipped to customers.

“With this simple pay-as-you-go service, sellers are free from the time-consuming, cumbersome process of moving inventory from upstream facilities to Amazon fulfillment centers,” Amazon VP of Distribution and Fulfillment Solutions Gopal Pillai, wrote in a blog post announcing the service. “AWD makes the promise of supply chain as a service a reality and is specifically designed to solve inventory management challenges and deliver operational efficiencies.”

Amazon added that sellers using the service will be able to consolidate global inventory into one pool, which can in turn be managed through Seller Central.

In 2023, Amazon said the service will be available for sellers to send their inventory to “any location,” including wholesale customers or brick-and-mortar stores.

At a time of supply chain headaches, storage has become one of the biggest challenges for brands and retailers selling consumer goods over the last three years. According to a recent report on the state of US logistics by the global management consulting firm Kearney, warehousing capacity reached its peak in 2021. Vacancy rates dropped to their lowest point on record, while the cost of storage per square foot rose to the highest. Michael Zimmerman, a partner at Kearney who runs the global logistics practice, told attendees of the NACDS Total Store Expo that supply chain issues are likely to continue, and advised them to work to add capacity.

“You’ve probably heard the expression, ‘Hope is not a strategy,’” said Zimmerman. “This is a perfect example of that. Get your supply chains ready.”

For its part, Amazon said a recent survey of US sellers showed that the three biggest pain points for sellers in upstream warehousing and distribution operations are:

• High prices for storage
• Complicated fee structures
• Insufficient storage capacity.

As it navigated skyrocketing demand for goods sold online and sought to speed delivery times, Amazon added significantly to its logistics network over the last three years. It now stands at about 1,250 facilities in the US, according to the supply chain and logistics consulting firm MWPVL. In fact, the network had grown so large that in April executives said the company had overbuilt warehouse space, and would pursue subleasing and consolidation while slowing expansion in the latter half of 2022.

With new facilities coming online for AWD, apparently that doesn't mean expansion is being halted together. With AWD, Amazon is putting warehouses to work for sellers, who run independent businesses that sell on Amazon's marketplace. AWD will be a service offered to third-party sellers in addition to Fulfillment by Amazon, the service that allows third-party sellers to allow the fulfillment of orders to Amazon. It is also rolling out Buy With Prime, a service that allows brands to make Amazon's shipping and returns services available to websites outside of Amazon.com, and, in turn, presumably will lead these brands to tap into FBA.

For its part, AWD offers a path to enter Amazon's logistics network earlier in a good's journey, and adds capacity to that network. The new warehouses that will be part of AWD are “purpose-built facilities for bulk inventory storage and automated distribution,” the company wrote.

“With one click sellers can send their inventory to Amazon Distribution Centers and significantly reduce storage costs, while eliminating complex pricing schemes and long-term contracts that are common throughout the industry,” Pillai wrote. “Sellers can integrate their upstream inventory storage operations with the Amazon Fulfillment Network, ensuring they always have the right amount of inventory in stock, in the right places and at the right times.”