If you’ve come to the conclusion that building a circular business goes beyond recyclable packaging and sustainable materials—you’re in the right place. You might already have experienced that logistics plays a central role in making circular business models work and it is also seen as one of the biggest hurdles in scaling circular business models, as managing the reverse flow of products—handling returns not as exceptions, but as part of the core business, is not so straightfoward.

Reverse logistics introduces a second layer most companies aren't used to:

• Products come back at unpredictable times
• They need to be cleaned, repaired, stored, and reshipped
• And each step impacts margins, customer experience, and scalability

Plus, there’s the key decision every company faces: Do we manage this in-house—or partner with someone who specialises in circular logistics? The answer depends on your business model, product complexity, internal expertise, and operational scale.

Whether you’re running a buy-back or trade-in program, a rental or lease service, a subscription model, or selling preloved and second-hand products, they all share one operational reality: Products need to come back, be processed, and be sent out again.

That means logistics can’t just be about delivery. It must also handle returns, inspections, repairs, refurbishment, storage, and redistribution. In short—it has to be circular too.

Understanding how to do that well requires more than theory. It calls for insights grounded in real-world operations, trade-offs, and lessons learned from companies actively navigating this space.

In this guide, we’ve distilled what we’ve learned from working with companies building circular models across industries—and from speaking with those doing it at scale. Our insights are informed by interviews and collaborations with companies like Bike Club, StrollMe, Bugaboo, Stokke, and TIER, and from an in-depth discussion with Ilari Puputti from Posti, Finland's largest logistics provider.

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This article is part of our larger deep-dive on circular logistics. If you want to understand how logistics fits into the bigger picture of building and scaling circular business models, check out our main guide: How Logistics & Reverse Logistics Work in Circular & Product-as-a-Service Business Models. 

What’s different about logistics in circular models?

In traditional (linear) models, logistics is about getting the product from point A to B. Once the product is delivered, the job is done.

In circular business models, the product loops back.

• It returns from the customer
• It may need to be inspected, cleaned, repaired, or refurbished
• It gets stored and prepared for its next use
• And then it gets shipped again to a new customer

This means logistics no longer supports a single transaction. It supports a continuous product lifecycle.

Why the loop creates operational strain

Circular logistics introduces new layers of complexity that most companies simply aren’t set up to manage:

• Products come back at unpredictable times
• Returns vary in condition, from lightly used to needing full refurbishment
• Returned items originate from scattered locations, complicating consolidation

Each return sets off a branching workflow:

• Inspect
• Grade
• Repair (or not)
• Store
• Redeploy

Each step has cost, time, and process implications. Without the right infrastructure and systems, this loop becomes a bottleneck.

Circular returns are not traditional returns

In linear models, returns are the exception. They usually happen because of an issue or defect.

In circular models, returns are the norm. They are:

• Expected
• Frequent
• Core to the business model

That means you need to plan not just for "how to get the product back" but:

• How quickly can you turn it around?
• How many cycles can a product survive?
• How do you do this at scale, without destroying your margins?

Is reverse logistics actually complex?

It depends on how it’s approached.

As Ilari from Posti shared:

“You can make logistics complex—especially if you treat it purely as a cost factor rather than a source of business value. In many cases, the complexity isn’t in the logistics itself—it’s in how businesses approach it, often holding on to old systems or underestimating what’s required to scale a new model like subscriptions or trade-ins.”

In other words, complexity often arises not from logistics itself, but from misalignment between business goals and logistical readiness.

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Should we manage reverse logistics in-house or work with a partner who specializes in circular flows?

Most companies already outsource forward logistics (e.g., fulfillment and delivery) to providers like Posti, DHL, or UPS.

But reverse logistics is different.

• Products come back
• They need to be cleaned, repaired, repackaged, and stored
• Then shipped again for reuse, resale, or rental

This raises a key strategic question: Should we manage reverse logistics in-house or work with a partner who specialises in circular flows?

Ilari says “Often companies say, ‘We handle all logistics ourselves.’ But the real question is: Is this a key competence for your business—or just something you've always done?”

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Factors that influence the right setup: in-house vs. outsource

There’s no one-size-fits-all answer, but here are some key factors to consider:

• Company size
  Smaller teams may lack the resources to manage complex return flows. Larger ones may have the infrastructure, but still need to weigh opportunity cost.
• Business model: retailer vs. manufacturer
  Manufacturers often have repair and refurbishment experience. Retailers may benefit more from outsourcing to specialists.
• Product complexity
  Bikes, electronics, and furniture require technical inspection or repairs. Apparel or books? Much simpler.
• Existing expertise and infrastructure
  If you don’t have systems and talent in place, outsourcing can save time, money, and mistakes.

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What makes reverse logistics work?

Whether you do it in-house or outsource, reverse logistics needs to be:

• Proactive – Anticipate returns and plan cycles in advance
• Cost-efficient – Protect already-thin margins
• Scalable – Able to grow as your circular model succeeds

Because in circular business models, reverse logistics isn’t a support function.

It is the business model.

What to consider when tackling reverse logistics

Once you accept that circularity changes how logistics works, the next step is figuring out what exactly needs to change—and where the biggest complexities lie.

Here are the key areas every company should evaluate:

1. Pickup and Return Strategy

Reverse logistics starts with getting the product back.

• Will you offer home pickup or drop-off locations?
  
• How will customers trigger a return, upgrade, or swap?
  
• What happens when they no longer have the original packaging?
  
  

2. Product Assessment and Routing

Not every returned product needs the same treatment.

• Do you inspect items before they reach the warehouse?
  
• Can you automate decisions like refurbish, resell, or recycle based on condition?
  
• Who decides what happens next—and how quickly?
  
  

3. Repair, Refurbishment, and Readiness

Reverse logistics is more than shipping—it’s operations.

• Do you have facilities or partners for cleaning, testing, and repair?
  
• How do you track product condition across cycles?
  
• Are your SKUs and product designs optimised for repeat use?
  
  

4. Storage and Inventory Sync

Products don’t always go back on the shelf right away.

• Do you need temporary storage?
  
• Can your warehouse software handle items in different stages of readiness?
  
• What happens to items that are returned but not immediately reusable?
  
  

5. Reshipping and Redistribution

Once a product is ready—how does it get back out?

• Are your fulfillment and delivery systems set up to handle second-life products?
  
• Can you offer fast turnaround for subscribers expecting upgrades or replacements?
  
  

6. Cost Structure and Sustainability Impact

Every return flow comes at a cost—financial and environmental.

• Have you modeled the unit economics of your return cycles?
  
• Can you reduce unnecessary transport through regional hubs or better forecasting?
  
  

By thinking through these areas early, companies can avoid the “oh no” moment many face after their first few hundred returns.

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Final thoughts: Rethinking logistics for a circular future

Circular business models promise sustainability, customer loyalty, and new revenue streams—but they also demand operational maturity. At the heart of it all is logistics. More specifically, reverse logistics.

The companies that succeed in this space don’t treat reverse logistics as an afterthought or a cost center. They treat it as a strategic capability—one that must evolve alongside their circular ambitions.

Whether you're just starting with a pilot or scaling an established program, the takeaway is clear: don’t bolt circularity onto a linear system. Build with circularity in mind from the start.

Reverse logistics may be one of the biggest challenges in circular business—but it’s also one of the greatest opportunities to differentiate, delight customers, and drive long-term success.