Turn circular opportunities into profit generators with the right outsourcing partner

Enhancing revenue after the sale

More than 75 percent of businesses now recognize circularity as important, up from 40 percent three years ago. The decision to outsource reverse logistics and circular economy services seldom generates much corporate angst. Generally, it’s a straightforward build vs. buy calculation that centers on how best to invest profits back into the business. Standing up and maintaining one’s own practice in an area that is not core to the business can be expensive and time-consuming, and funds may be better spent on innovation and product development. That doesn’t make it any less essential.

In my experience, the most effective circular economy strategies do not begin at the point of return. They are shaped earlier in the product lifecycle, influenced by decisions made during design, sourcing, and manufacturing that affect repairability, material reuse, regional availability, and overall value recovery. Reverse logistics and aftermarket services are the execution layer, but the opportunity to capture value is often determined long before a product ever reaches a customer.

As OEMs embark on the search for the right outsourcing partner, the first order of business is to understand what is needed, and where. Global companies with a complex portfolio and diverse customer base will require an equally sophisticated partner whose expertise and capabilities span geographies and disciplines. Returns, repairs, refurbishment, and recycling are complementary when looked at through the lens of value creation and reclamation, and reverse logistics is the means by which they get done efficiently.

Beyond direction of flow: How reverse and forward logistics differ

Reverse logistics expertise is essential for success in a circular economy focused on value recovery. It requires a different set of capabilities than forward logistics, for a few reasons. One, return volumes vary widely, making demand less predictable than aftermarket fulfillment and service operations. Outsourcing partners must be adept at handling peaks and troughs. Two, destinations differ. Products may need repairs or technology upgrades. They may need to be refurbished and resold. They may have reached the end of their lifecycle and need to be recycled or disposed of responsibly. And three, customer participation is essential, as they initiate the return or service request. Customer management requires operational and relational finesse.

To manage this complexity effectively, reverse logistics must be tightly integrated with aftermarket services, analytics, and customer-facing processes. Visibility, screening, and intelligent routing are critical to ensuring products move quickly and efficiently to their next best use, whether that is repair, resale, reuse, or responsible recycling. Just as important is capturing the right data across each return and recovery outcome, enabling traceability, informed decisions, cost control, and reporting that supports corporate ESG goals.

Managing and coordinating circular economy services across multiple third-party providers is rarely the most expedient or cost-effective strategy. Finding a single provider with expertise in the disciplines important to an OEM’s profit profile is often the most expedient path to value recovery.

Choosing an outsourcing partner: 8 key attributes

Once the decision is made to outsource, the big question becomes, “To whom?” Companies delivering reverse logistics and circular economy services number in the thousands, many with their own areas of specialization and geographic focus. A deep dive into strategic suitability should encompass these eight attributes (not a complete list, but a good starting point):

Alignment

This is the low-hanging fruit of the due diligence process. Is the potential partner present in the right geographies? Are they familiar with market, trade, and industry nuances? Are they financially sound? A thorough assessment at this point can help narrow the field.

Capabilities

Here, the key question is whether a potential partner has the skills, tools, technologies, and expertise to support the OEM’s business — not only for today’s needs, but for the foreseeable future. Rapid technology innovation and competition for experienced workers mean the pragmatic approach is the forward-thinking one.

Location

Proximity matters. Think about shipping and inventory costs, carbon footprint, repair SLAs, etc. The right capabilities in the wrong places can get expensive. Trade issues, supplier networks, manufacturing capacity and other considerations may also come into play. Thoroughly assess partner attributes vs. business and customer requirements.

Integration

There are two aspects to integration: product and process. Product integration is about putting products together reliably and cost-effectively — kitting, packaging, racking, etc. Process integration, in this context, is about unified services, business interlocks, and frictionless movement of goods. Requirements and preferences both play a role here.

Orchestration

From supply chain logistics and vendor coordination to business continuity and customer expectations, orchestration boils down to timeliness. Coordinated, well-managed services look like promises kept — not only when it’s business as usual, but when adversity and disruption hit, too (as they inevitably will).

Agility

The global stage is no place for the flat-footed. Not only do partners need to be able to support established roadmaps and growth strategies, they also must have the operational agility to pivot quickly when markets, technologies, and customer requirements shift.

Customization

No two OEMs are alike. The right partner will be able to customize their services (within reason) to meet specific requirements. This includes operating to required consumer and environmental regulations, which continue to increase in scope and complexity across regions. This is the best of both worlds — proven capabilities tailored to business needs, industry standards, and the regulatory landscape.

Receptiveness

Often overlooked, receptiveness is essential to the success of the relationship. Ease of doing business, collaborative mindset, appetite for innovation — receptiveness casts a wide net but its central tenet is the partner’s desire to support an OEM’s needs, requirements, and preferences.

Empowering transformation and value creation

For OEMs that seek to enhance long-term profitability and sustainability, Flex offers scalable, customized services that augment their core capabilities and add tangible value throughout the product lifecycle. We are the partner of choice for circular economy solutions that empower a transformation to a closed-loop, regenerative economy with services that drive incremental revenue, reduce waste, and help companies achieve desired sustainability outcomes.