News and Updates

Recently, the terms “Reverse Logistics” and “Circular economy” have become popular buzzwords used by journalists, industry organizations, and news outlets. In this article, we’ll break down what these terms mean and how they connect to the larger parcel industry.

What is a Circular Economy?

“Circular economy…aims to minimize waste and promote a sustainable use of natural resources, through smarter product design, longer use, recycling, and more…” – What is a circular economy and why does it matter? By UNDP (2023)

A circular economy allows existing resources to last longer and generate more value over time, enabling companies to do more with less, whether that’s products, money, or human resources.

What is Reverse Logistics?

Reverse logistics is not a reverse of forward logistics. Rather reverse logistics is a separate but parallel process to forward logistics. Companies may use similar financial and labor pools to run both forward and reverse logistics operations.

As return volumes continue to rise, especially during peak seasons, many companies are rethinking how they manage this process. Planning ahead for high-volume periods like the holidays has become critical, as outlined in Holiday Returns Management: How to Stay Ahead in 2025 and How to Handle Holiday Returns.

Visualizing Reverse Logistics in Motion

“Reverse logistics encompasses all activities that occur after a product’s initial sale or it includes managing returns, recovering unsold or excess inventory, and refurbishing items, recycling materials, donating unsellable goods and responsible disposal.” – Reverse logistics: The cornerstone of the circular economy (2025) by Cathy Roberson for NRF

Step 1 – A product is recovered.

The reverse logistics process begins when a product re-enters the supply chain. This can happen in several ways. A customer might return an item due to damage, incorrect fit, or changing needs. Retailers may also pull back unsold or excess inventory from stores, especially at the end of a season or product cycle.

Step 2 – The returned product is inspected and graded.

Once a product is recovered, the next step is to determine what can be done with it. This is where inspection and grading come in. Each returned item is evaluated to understand its current state and potential value.

Step 3 – The product moves onto the next phase of its useful life.

If a product has passed inspection and is in good condition, it often returns to inventory for resale. In some cases, it may be sold at a discount or through an outlet channel to move it more quickly. When resale isn’t the best option, products may be directed elsewhere. Some are sold in bulk to liquidation partners, where value can still be recovered at scale. Others are sent to recycling facilities, where materials are broken down and reused. Items with little to no recoverable value may ultimately be disposed of, ideally following responsible and compliant processes.

At a broader level, the goal of reverse logistics is to extend the useful life and financial value of products wherever possible, while also maintaining a positive customer experience. A smooth returns process builds trust, but what happens after the return determines how much value the business can recover.

In practice, this is where technology can play a role. Solutions designed specifically for reverse logistics, such as LightSort for the reverse logistics industry, focus on improving sorting speed and accuracy, helping operations process returns more efficiently and reduce bottlenecks.

Meeting in the Middle: How Circular Economies and Reverse Logistics Work Together

Prioritizing concepts like circular economies in long-term business strategies can help companies develop and improve other processes and areas of their business. Implementing these concepts with reverse logistics allows companies to think more holistically about the life cycle of their products: How can the use of new materials be optimized? How can a product be quickly assessed after collection? How can recovered materials be upcycled for a new use?

Companies can then connect this thought process about their products to consider the customer experience with said products. Is it easy for customers to return unwanted products? How does our operation process these returns? Are customers receiving communications in a timely manner?

Major corporations like IKEA are starting to seriously invest in these concepts. In 2019, IKEA teamed up with a company called Optoro to optimize IKEA’s reverse logistics process, focusing on the U.S. market first. In the years since, IKEA has made a strong push to develop a more circular internal structure and product design.

Looking Ahead

Reverse logistics and circular economy principles are often talked about at a high level, but their impact is most visible in day-to-day operations. Every returned product, every recovery decision, and every routing choice adds up. Over time, those small decisions shape how efficiently a company uses its resources and how much value it can retain.

For operations teams, the opportunity is practical. Improving visibility, speeding up inspection and routing, and making more consistent decisions can all move the needle. At the same time, these changes support broader goals around waste reduction and resource efficiency without requiring a complete overhaul of existing systems.

As return volumes continue to grow, reverse logistics will only become more important. Companies that treat it as a core operation, rather than a secondary process, will be in a better position to recover value, improve customer experience, and adapt to evolving expectations around sustainability.

In the end, the connection between reverse logistics and the circular economy comes down to one idea: making better use of what you already have.