As the world transitions towards a more circular economic model, companies across industries are facing a profound shift in how they must operate and compete. The linear "take-make-waste" approach of the past is being replaced by a circular imperative focused on reducing waste, reusing materials, and maximizing value recovery throughout a product's lifecycle.
In this transformative landscape, competitive advantage will hinge on building new core competencies – ones that equip companies to thrive in an economy centered more around circularity than in the past. Two such critical capabilities are reverse logistics expertise and digital platform strategy. Individually, each unlocks powerful benefits. But it's the synergistic combination of these two competencies that will create truly circular organizations, optimized for sustainability, profitability, and superior customer engagement.
Reverse Logistics: The Backbone of Circularity
In a circular economy, a product's journey doesn't end with its initial sale and use. After the consumption phase, companies must have robust systems in place to retrieve products, components, and materials for inspection, refurbishment, and ultimately, resale or recycling. This is where reverse logistics comes into play.
Reverse logistics expertise allows firms to efficiently manage the flow of returned products, thoroughly inspect them, repair or refurbish items to extend their lifespan, and resell renewed merchandise to maximize value recovery. Done well, reverse logistics reduces costs, minimizes environmental impact, and unlocks new revenue streams through the resale of refurbished goods.
Digital Platforms: Enabling Circular Resale
While reverse logistics handles the physical flow of products, digital platforms provide the technological backbone to facilitate their resale in a circular model. Robust digital platforms offer the infrastructure and capabilities for streamlined returns processing, detailed inventory tracking, and seamless sales channels to market refurbished, renewed, or open-box merchandise.
With platforms, companies can create resale experiences for customers that reduce friction, efficiently manage stock levels, and ensure a steady stream of revenue from the secondary life of products. Lower transaction costs, more efficient matching, and network effects open new opportunities to scale. Platforms become the connective tissue between the reverse logistics operations and end consumers, completing the circular cycle.
The Powerful Convergence
It's the integration of reverse logistics expertise and digital platform strategy that can truly propel an organization into the circular economy. This convergence creates a technology-enabled reverse supply chain optimized for resale, unlocking several key advantages.
By harmonizing efficient returns management with robust resale channels, companies can extract maximum value from returned products through refurbishment and resale, rather than discarding items prematurely. An optimized reverse supply chain minimizes costs associated with product returns and extends product lifecycles, resulting in significant reductions in waste and environmental impact. Providing transparent, convenient returns processes combined with easily accessible resale options through digital platforms creates superior customer experiences that foster loyalty and trust.
The unique synergy between reverse logistics and platform capabilities is difficult for competitors to replicate, offering companies a powerful competitive edge in the circular economy.
The Case of Lenovo
Lenovo provides an example of how circular practices that combine circular logistics with platform savvy are becoming central to building competitive advantage. Since IBM sold its personal computer business to Lenovo in 2005, Lenovo has grown to become one of the world's largest PC makers. Lenovo used the IBM ThinkPad brand as a platform to expand its global presence. It became a major player in the worldwide PC market, challenging giants like HP and Dell. While laptops and desktops remain a core business, Lenovo has diversified its product portfolio to include tablets, smartphones, workstations, servers, and data center solutions.
Today, Lenovo produces approximately 25 percent of all laptops manufactured in the world.1 Lenovo does not publish specific production data. However, if we assume Lenovo's laptop production is proportional to its market share, and that laptops account for around 70-80% of the overall PC market (a reasonable estimate), we can estimate that Lenovo produces somewhere between 50-65 million laptops annually. According to the company’s website “Since 1995 we have shipped more than half a billion PCs, and we make three devices every second.”2
One of Lenovo’s mega laptop factories
Going circular has become a growing strategic imperative for the company, which is being met in several ways. One area involves designing out waste and pollution in its products. For example, the packaging for the Motorola Razr (2nd gen) smartphone can be reused in unique ways to extend the useful life of the packaging. Lenovo is optimizing the use of its products and resources through innovative business models. The company launched its Lenovo Value Recovery (LVR) program, which provides certified refurbished data center equipment to customers, extending the life of excess, surplus, and end-of-life products.3 Lenovo is capturing resources and value to keep products, parts, and materials in circulation. For example, the company's take-back programs make it easy for customers to recycle old devices, batteries, and packaging.
The company is also improving its ability to repair its products. One goal has been to drastically improve the repairability of its ThinkPad T series laptops. Prior models of the T series had a repairability score of 7 from iFixit, but the new 2024 models including the ThinkPad T14 Gen 5, T14s Gen 5, and T16 Gen 3 have earned a 9.3 repairability score. As part of its repair initiative, Lenovo announced a partnership with repair company iFixit in February 2024.4
iFixit is a centralized online marketplace where users can access repair guides, purchase tools and replacement parts, and engage with a community of repair enthusiasts and professionals. A key aspect that qualifies iFixit as a platform is its reliance on user-generated content. A significant portion of the repair guides, solution manuals, and other resources available on the platform are created and contributed by the user community itself. iFixit facilitates interactions between various user groups, including DIY repair enthusiasts, professional repair technicians, device manufacturers, and third-party parts suppliers. Finally, iFixit exhibits network effects, where the value of the platform increases as more users contribute content and engage with it.
Lenovo also takes advantage of circular marketplaces through third-party resellers. Lenovo has established an ecosystem of authorized resellers or remarketers who purchase refurbished inventory in bulk from the manufacturer. These third-party resellers then list and sell the refurbished products on various online marketplaces like Amazon Renewed, eBay Refurbished, and Back Market.
Refurbished laptops for sale on Amazon Renewed
By working with resellers, Lenovo can leverage their expertise in handling reverse logistics, remarketing, and selling refurbished products through multiple online channels. Resellers often have established processes, relationships, and experience in managing listings, fulfillment, and customer service for these online marketplaces. While Lenovo may not directly sell on these third-party marketplaces, it can still maintain control over the quality and standards of refurbished products by certifying and authorizing resellers to handle the remarketing process. This ensures that only products meeting Lenovo's refurbishment criteria are sold through these channels.
While Lenovo has a great deal more to optimize these circular programs, the direction is clear. Reverse logistics expertise allows Lenovo to efficiently manage the flow of returned products, inspect, repair, and resell them, maximizing the value recovered from returned items. Likewise, a sophisticated understanding of platforms provides the infrastructure and capabilities to enable streamlined returns processing, inventory tracking, and sales channels for reselling refurbished Lenovo products. The synergy between reverse logistics and digital platform strategy creates an integrated approach to building circular competitive advantage.
Conclusion
The combination of reverse logistics and digital platform strategy is becoming increasingly important to building circular competitive advantage. These unique capabilities optimize reverse supply chains for value recovery, reduce waste and costs, open new revenue streams through resale, and create superior customer experiences - all of which drive sustainability and profitability. Digital platform strategy provides the infrastructure and capabilities to enable streamlined returns processing, inventory tracking, and sales channels for reselling refurbished or open-box items. This combination of competencies helps reduce costs, improve sustainability, enhance customer experience, and gain a competitive advantage in the market.
Circular Logistics & Platform Strategy Masterclass
If you’d like explore this topic further, join us in Barcelona on May 30th for the Circular Logistics & Platform Strategy Masterclass. I will teach this course with Rich Bulger, the author of Going Circular: The Evolution of Reverse Logistics into a Competitive Weapon.
The course workshop covers strategic frameworks and implementation expertise required to drive circular economy initiatives in your organization. It will provide the fundamentals of reverse logistics and circular platforms; frameworks for identifying and prioritizing recommerce opportunities and connections with peers facing similar challenges to drive collaboration.
For more details about this unique course see: Circular Logistics & Platform Strategy Masterclass. The course is made available through the collaboration of TheNTWKSummit24, McFadyen Digital, and Norrsken Barcellona.