You built a shopping assistant on a frontier model, and it works. A shopper asks for “a black waist bag under twenty dollars from a shop with at least 4.5 stars,” and the agent searches the catalog, inspects candidates, checks the constraints, and commits to a recommendation.
What happened
But what does that interaction actually cost? An agentic assistant is not one model call, it is a loop: search, read results, refine, verify, decide. A single completed task can be multiple calls to that frontier model, and you pay for every one, on every shopper. At production scale, that per-task cost compounds, erodes the project’s ROI, and stops the project from shipping.
Where the sources line up
One way to make an agentic application more efficient is to use a smaller model, which is faster to respond and more cost-effective to host. The catch is quality: a smaller model usually falls short on the task, which is why the larger one was chosen in the first place. Knowledge distillation closes that gap by transferring the behavior of the larger “teacher” model into a smaller “student”, training the student to reproduce the teacher’s outputs, so it keeps much of the quality at the smaller model’s speed and cost.
Practical impact for readers
In this post you will learn how to use knowledge distillation, and specifically sequence-level knowledge distillation (SeqKD), to fine-tune a shopping agent on Amazon SageMaker AI . We cover how to generate high-quality multi-step trajectories with a frontier teacher and keep the ones that solve the task, how to encode them for supervised fine-tuning, how to run the training on serverless infrastructure, and how to evaluate the student against a held-out benchmark.
Who should pay attention now
Figure 1: One agentic task is a loop, not a single call: the agent searches, reads results, refines, verifies, and decides, and each step is a separate billed call to the frontier model. A single completed task can be multiple calls, on every shopper.
What is still unclear
The simplest applicable form of distillation is sequence-level knowledge distillation (SeqKD). It uses a teacher model to generate high-quality responses, then trains a student model on those responses with supervised fine-tuning (SFT). SeqKD needs only the teacher’s text , with no access to teacher logits and no reinforcement-learning infrastructure, so it works even with a closed or API-only teacher. Compared to other approaches such as logit-based or on-policy, it sits at the most cost-effective and portable end of the distillation spectrum. The teacher writes the answers, and the student is fine-tuned on them. Because those answers persist as a dataset, you can reuse them to train or test different students without regenerating the data.
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