Circular Transformation of Industries The Art of Scaling Circular Supply Chains 2025

Network design: choosing central hubs or local operations Network design determines how and where reverse flows are managed – from collection to reconditioning – and how they connect back. The key question is whether to centralize or localize these activities. This question is valid both for insourced and outsourced capabilities. Start with customer geography and behaviour: Network design begins with understanding where returns originate and how customers engage. Urban areas may benefit from designated collection points, while rural areas require home collection. Consumer preferences should shape the network.Assess needs for each supply chain step: Circular supply chain steps have distinct needs. Local collection and sorting benefit from proximity to return sources, while remanufacturing often requires centralized hubs with skilled labour and diagnostics. Weigh central versus local trade-offs: Centralized networks such as regional hubs offer consistency and scale efficiency, useful for complex tasks. Localized models bring speed and customer convenience, especially for collection or basic repair. Most organizations benefit from hybrid set-ups. Plan for growth: Early-stage circular initiatives often begin in key locations. As programmes scale, networks must adapt. Designing with modularity and flexibility in mind will enable growth. 3.3 Operational capabilities: building blocks for circular scale After making design choices, companies need to assess and strengthen underlying operational capabilities. Circular flow planning: Companies need to analyse return dynamics, including product life cycles, failure patterns, seasonality and customer behaviour to manage unpredictable returns. According to the 2025 survey, forecasting and planning rank as the most critical capabilities, surpassing logistics. Internet of things (IoT) sensors and real-time monitoring of status and location, augmented with AI, improve maintenance predictions and return timing. Some companies hold inventory buffers while others, such as Logitech, adopt build-to-order approaches to minimize excess inventory. Procurement and reverse logistics: Early visibility into product condition is critical. Quick checks by stores or logistics partners, customer self- declarations, IoT diagnostics and product passports reduce unnecessary transport and flag unsuitable returns (see GreenPlat traceability study in Chapter 4 of this paper). Customer education improves return quality. Apple, for example, provides in- device battery health prompts to guide users for service timing. Procurement must move towards sourcing used products and recycled materials. Customer engagement: Understanding customer behaviour is central to circular participation. Loyalty and buyback programmes, used by over 40% of surveyed companies, encourage returns. Refurbished product sales at lower prices reflect rising demand for sustainable, affordable options. In 2023, 71% of UK, US, France and Germany consumers reported buying or selling used goods.6 Because consumer behaviour varies between regions, companies must tailor their strategies to local markets. For companies looking to go further, new models like product-as-a-service or leasing can extend customer retention and life cycle control. CASE STUDY 4 Volvo Group – incentivizing customers Volvo Group’s remanufacturing programme maximizes value by extending product life. The company recovers used parts through a global network, restores them in one of eight remanufacturing sites or through one of approximately 100 partners and reintegrates them into vehicles. Key enablers for customer demand include: competitive value-based pricing, efficient core returns with fast deposit handling, as-good-as-new quality and worldwide availability. The profitable programme employs over 800 people in Volvo Group plus additional people at the external partners.7 Urban areas may benefit from designated collection points, while rural areas require home collection. Consumer preferences should shape the network. Circular Transformation of Industries 20