Reverse logistics is far more than managing product returns; it's the process that ensures goods, materials and resources continue to generate value long after their initial sale. Reverse logistics serves as the cornerstone of the circular economy.
Reverse logistics encompasses all activities that occur after a product's initial sale or distribution. It includes managing returns, recovering unsold or excess inventory, inspecting and refurbishing items, recycling materials, donating unsellable goods and ensuring responsible disposal.
Browse downloads and tools from reverse logistics experts.
Unlike forward logistics, which focuses on getting products to customers, reverse logistics deals with bringing products back. This reverse flow is far more complex because each returned or recovered product can take a different path. Some can be resold as new, others require refurbishment, some are recycled, and others are donated or responsibly disposed of.
Each of these outcomes requires a combination of inspection, disposition, transportation, processing and resale — often coordinated among multiple partners, from recyclers and liquidators to nonprofit organizations and secondary marketplaces.
A typical reverse logistics process begins with product recovery and inspection. Returned items are collected from manufacturers, retail stores, warehouses or directly from consumers. Once received, they go through a disposition process, where logistics teams determine the best next step for each item based on its condition, resale potential and material composition.
Items deemed suitable for reuse or resale are refurbished or cleaned, then reintroduced into inventory for sale — either through traditional retail channels or secondary markets such as eBay, Facebook Marketplace or liquidation platforms.
“Direct-to-consumer marketplaces provide great engagement with the end buyers,” said Liquidity Services Director of Client Solutions Mary Cho at the CSCMP Annual Conference in October. “And the closer we can get to the end buyers, the higher the revenue recovery. Not to say that there is no space for B2B marketplaces. Those marketplaces provide higher selling velocity.”“Bin stores also provide a great way to move bulk items and low-value items,” said DHL Product Leader for Returns and Circularity, North America, Joe Desormiers, also at the CSCMP conference. “Local buyers have the option to purchase and collect liquidated goods directly from a warehouse. This secondary market option is attractive because it cuts out shipping costs and the possibility of returns.”
Products that cannot be resold are evaluated for donation or recycling. Materials like plastics, metals and textiles can often be collected, sorted and sold for use in manufacturing processes. Others are better suited for donation to charitable organizations that can repurpose them for communities in need — further extending their useful life and social value. Items that cannot be donated or recycled are disposed of responsibly.
Reverse logistics transforms circular economy ideals into tangible results across industries. Major retailers and logistics partners are proving that sustainability and profitability can go hand in hand through smart reuse and resource recovery.
One example is The Home Depot’s collaboration with Glad Trash Bags. Through this partnership, The Home Depot sells used plastic stretch wrap collected from its distribution centers to Glad, which then uses the recycled plastic to manufacture new trash bags. This partnership diverts plastic waste from landfills and shows how supply chain collaboration can turn waste into raw materials for new products.
The Home Depot also works closely with Good360, a nonprofit that distributes surplus goods to communities in need. When donation partners face shortages, The Home Depot identifies inventory that would otherwise be liquidated and redirects it to Good360’s network of local partners. This not only supports sustainability goals but also strengthens community relationships and prevents usable goods from going to waste.
As Troy Campbell, director of reverse logistics centers for The Home Depot, explains, collaboration is key: "When one of our donation partners faces a shortage, we determine if there is product we can provide — often items that would otherwise be sold through our liquidation channels.” Campbell said. “Additionally, our facilities partner locally with communities, supporting smaller events near their sites.”
These partnerships show how reverse logistics can align economic value recovery with environmental and social impact — a win-win for businesses, communities and the planet.
While reverse logistics often involves manual processes, technology powered by data analytics is emerging to enable visibility, control and optimization across reverse logistics processes.
Platforms like Liquidity Services' liquidation.com enable businesses to automate the resale of returned or refurbished goods to secondary buyers. Other third-party reverse logistics providers, such as ReturnPro and BidPath, use technology to accelerate returns processing, resale and more.
Automation and artificial intelligence (AI) are increasingly used to streamline reverse logistics operations. Robotics assist in sorting and handling returned goods, while AI-powered systems predict return volumes, identify optimal resale channels and forecast material recovery potential.
Reverse logistics delivers measurable business benefits, including cost reductions and improved consumer experiences.
According to industry insights from Deloitte, businesses with optimized reverse logistics can recover up to 65% of the original value of returned items in best-case scenarios. This significantly reduces the cost of reverse logistics operations.
The National Retail Federation and Happy Returns, a UPS company, explore both consumer and retailer perspectives and priorities for the returns experience.
Reverse logistics can also improve customer satisfaction because streamlined returns and repair processes enhance the overall consumer experience. Eighty-two percent of shoppers cite free returns as major consideration when making a purchase, according to the 2025 Retail Returns Landscape report from NRF and Happy Returns, a UPS company. And about 71% of consumers say they are less likely to shop with a retailer again after a bad returns experience.
For retailers and manufacturers with ESG (environmental, social and governance) targets, reverse logistics offers a tangible, results-driven approach to demonstrating progress. It provides data on waste diversion, recycling rates and recovery value — offering transparency for sustainability reporting.
Just as importantly in today’s volatile business environment, effective and efficient reverse logistics processes help companies manage unpredictability in global supply chains. Selling used inventory reduces import costs. When raw material prices fluctuate or production is disrupted, reclaimed materials serve as alternative inputs, reducing dependence on virgin resources. Both selling used products and using recycled materials improve supply chain resilience.
The success of reverse logistics depends on coordination among diverse players including retailers, manufacturers, logistics providers, recyclers, refurbishers, resellers and nonprofits. Each plays a role in ensuring products move efficiently back through the value chain.
Partnerships are especially important when scaling circular initiatives. For example, collaborations between manufacturers and logistics providers enable efficient product retrieval and remanufacturing. Partnerships with recyclers ensure responsible materials processing. Nonprofit alliances — such as The Home Depot and Good360 — close the loop by redistributing excess inventory in ways that provide greater community value than recycling alone.
Despite its benefits, reverse logistics presents challenges such as handling unpredictable return volumes, managing multi-channel resale and maintaining visibility across partners — all of which can strain supply chains.
Cost management is another hurdle. Collecting, transporting and processing returned goods can be resource-intensive without the right technology and processes in place.
The future of reverse logistics is data-driven, collaborative and circular by design. As regulatory pressures increase and consumer expectations around sustainability rise, retailers and manufacturers that master reverse logistics will gain a strategic edge. Increasingly, reverse logistics departments are viewed as sources of recovered value — not cost centers.
To learn more about how leading retailers and logistics experts are advancing circularity, join us at NRF Rev, where subject matter experts will share real-world insights on building resilient, sustainable supply chains.
