Designing logistics processes to support sustainable business-to-consumer rental models

Achieving sustainable development goals will require several socio-technical changes (Fuenfschilling and Binz, 2018). One of the main changes needed is to move from dominant linear and transaction-based business logic to a logic of circularity and optimized resource utilization (Ripanti and Tjahjono, 2019), which, according to Govindan and Hasanagic (2018), requires a paradigm shift. This applies not least to the retail and consumer goods industry, where core businesses strive to maximize sales with little regard for what happens to the product after use, which encourages the “make-use-throw away” mentality (Ghisellini et al., 2016).

The linear, transaction-based logic often promotes low-quality products (Rivera and Lallmahomed, 2016) and drives increased waste and ineffective logistics activities (Dissanayake and Pal, 2023). Furthermore, for many consumer products, the actual need and usage are either temporary (e.g. toys, prams and baby seats) and/or seldom (e.g. tools and roof racks) (Ellen MacArthur Foundation, 2013). Consequently, from a resource utilization perspective, there are substantial numbers of resources tied up in products that are not used and are instead often placed in a wardrobe, garage or loft.

The concept of circular economy (CE) (Blomsma et al., 2019; Pearce and Turner, 1989; Korhonen et al., 2018) is discussed in both research and practice as a way to re-engineer linear and transaction-based logic and resource scarcity problems (Govindan and Hasanagic, 2018) to achieve sustainable development. In an earlier definition, CE refers to an industrial system that is restorative and regenerative by intention and design (Ellen MacArthur Foundation, 2013). Kirchherr et al. (2017, pp. 224–225) provide a more exhaustive definition, where CE is: an economic system that is based on business models that replace the “end-of-life” concept with reducing, alternatively reusing, recycling and recovering materials in production/distribution and consumption processes, thus operating at the micro-level (products, companies, consumers), meso-level (eco-industrial parks) and macro-level (city, region, nation and beyond), to accomplish sustainable development. This implies creating environmental quality, economic prosperity and social equity, to the benefit of current and future generations.

There is an increasing number of actors providing circular business models of consumer products (see Koide et al., 2022, for an overview). These new actors emphasize a rental business model and a strict governance structure to keep control of the products and assets (Bocken and Konietzko, 2022). However, as these models are based on providing accessibility to product usage, new and revised logistics processes are required, including traditional distribution, collection after usage, reconditioning and redistribution for usage by a new user in a new rental cycle. Thus, central challenges for all circular business models relate to logistics (Anandh et al., 2021; Neri et al., 2024; Corona et al., 2024).

In rental-based circular business models, the core logistics activities are carried out in the interface between the circular business actors (e.g. a rental retailer or a refurbishment centre) and the customer. In forward logistics, the delivery of a product to the end customer (the “last mile”) is typically the most costly (Mangiaracina et al., 2019) and environmentally impactful (Ranieri et al., 2018) part of fulfilling customer value. This is due to challenges in meeting service levels, i.e. delivery lead-time, delivery time windows and shipment individualization (Bergmann et al., 2020), small and infrequent orders, the wide geographical spread of destinations (Macioszek, 2018) and the need for packaging, which causes increased packaging waste (Escursell et al., 2021).

While rental models are based on the reuse of products, the problem of last-mile deliveries identified in e-commerce today can, in principle, be doubled as every used product should also be picked up, returned (i.e. reverse logistics) and prepared for a new round of usage. Consequently, questions arise about the role and challenges of logistics in circular setups. Linder and Williander (2017) note that the CE model has higher fixed costs because of the logistics and infrastructure required for exchange flows. Levänen et al. (2021) conclude that clothing rentals can be worse for the environment than ordinary buying practices due to increased transportation requirements. Hazen et al. (2021) report on several unknowns related to both demand and consumption patterns in the CE paradigm.

In our review of previous and ongoing attempts by business-to-consumer (B2C) rental companies, logistics challenges were found especially troublesome (e.g. Coelho et al., 2020; Koide et al., 2022). Consequently, while the emerging concepts of B2C rental models of consumer products are well aligned to the CE – especially regarding the factors of resource reuse and reduction – the net benefit for both profitability and the environmental impacts will diminish if logistics processes are not well-designed and executed. Hence, for rental business models to be sustainable, the development of effective and sustainable logistics is critical. MahmoumGonbadi et al. (2021) find a lack of empirical studies on circular supply chains (CSCs), and Butt et al. (2023, p. 1491) conclude that existing logistics networks are “neither well-prepared nor willing to address [reverse logistics] challenges”. Thus, there is a knowledge gap related to logistics in circular set-ups and a need for empirical research to frame constructs and models that can guide further studies and lay the foundation for advancing the theoretical development of logistics in the CE paradigm.

The purpose of this research is to explore logistics challenges and opportunities in circular B2C rental models to theorize how companies and their partners can achieve sustainability in their logistics processes. We specifically seek to answer the question: what key factors influence logistics considerations for circular business actors involved in renting out consumer products? In this research, the context is companies that rent consumer products with a focus on the logistics processes of restorative flows. Owing to the lack of both empirical research and practice of circular concepts in general (Butt et al., 2023) and especially related to logistics (Nikseresht et al., 2024), we chose a design science research strategy. By involvement and active participation in all phases of the design and implementation of a delivery concept, in collaboration with key actors, we gained in-depth insights into key details. Hence, the design science research strategy allowed us to uncover unique knowledge development and the possibility of theoretically developing CSC-based concepts and a framework for restorative flows of consumer products.

Our research contributes to the CE theory and practice by developing a theoretical framework and best practices on how logistics processes support B2C CE applications involving multiple business actors and end-customers ^[1]. Key implications are:

1. The need for new logistics practices, moving beyond traditional reverse logistics – focused solely on the efficient take-back of returns – towards practices, developed and implemented for product reuse and novel service provision.

2. New packaging alternatives are needed that both enable efficient (re-)handling for providers and reusable alternatives for customers, especially when returning products.

3. For rental models to deliver both economic and environmental benefits, careful evaluation of geographical proximity and rental period length is critical. Shorter rental periods and greater distances significantly increase both the cost and the material/energy intensity of logistics (re-) processes.

The remainder of this article begins with a brief review of literature germane to CSCs in Section 2. Then, we dive deeper into the role of logistics in CSCs and CE in Section 3. In Section 4, we explain the design science research method, which is followed by the findings presented in Section 5. A framework for the design and implementation of logistics for restorative flows is proposed in Section 6, providing a platform for further research and practice. The article concludes with a discussion of key insights and limitations (Section 7) that can inspire further research.

The idea of restorative flows is by no means new in the supply chain and production settings, with several concepts and cases presented on remanufacturing and closed-loop supply chains (CLSCs) (Guide and Van Wassenhove, 2009; Van Wassenhove, 2019). However, most existing research relates to product flows in business-to-business (B2B) settings (e.g. aerospace, automotive and electronics) and predominately from manufacturing-specific actor perspectives (Mishra et al., 2018). The manufacturing-specific actor perspective is also dominant in the rather few cases of consumer products (e.g. Grant and Banomyong, 2010). While there is a growing number of actors offering customers the opportunity to buy used products (e.g. Amazon Renewed, Patagonia Worn Wear, Game Stop and Swappie), the business models are based on transactional set-ups of product ownership that are adjusted to accommodate remanufactured or refurbished products. Furthermore, MahmoumGonbadi et al. (2021) conclude in their systematic literature review of CLSCs that out of 254 reviewed articles, the majority of articles focus on economic and monetary issues, while social and environmental issues are seldom examined. MahmoumGonbadi et al. (2021) also conclude that recycling is the most emphasized recovery option covered in CLSC articles, followed by remanufacturing. Consequently, in the advancement of CE, the emphasis on sustainable and circular flows and supply chains and the operationalization of logistics processes to support these are novel areas emerging in research and practice.

The concept of CSCs emerged to integrate CE with supply chain management and to enable new ways to undertake sustainable development in the inter-organizational setting. Farooque et al. (2019, p. 884) define circular supply chain management (CSCM) as: the integration of circular thinking into the management of the supply chain and its surrounding industrial and natural ecosystems. An integral aspect of CSCM is creating supply chain configurations that incorporate return flows for reuse and restoration of products and for material recovery when products are worn out. The design of these restorative flows should focus on value regeneration (Genovese et al., 2017). Although restorative flows cannot be fully circular due to entropy, supply chains informed by CE principles can result in more sustainable production systems (Hazen et al., 2021).

In essence, the concept of CSCs extends the CLSC by incorporating multi-product and wide, open-loop resource flows (Zhang et al., 2021), with a strong emphasis on all sustainability dimensions – especially the environmental one and the utmost utilization of resources (Vegter et al., 2020). Hence, as noted by Hazen et al. (2021), full implementation of CSCs requires transforming established supply chain configurations and collaboration set-ups, as well as training supply chain members and new processes for refurbishment and remanufacturing.

Two critical aspects put forward in previous research for physical products in restorative flows are (1) the products’ durability and re-capability (Dutta et al., 2016) and (2) customer interest and acceptance of reused products (Parajuly et al., 2020; Muranko et al., 2021). Products suitable for circularity need to be designed to enable restorative mechanisms (Tam et al., 2019) such as reuse, repair, upgrade, repurposing and remanufacturing (Blomsma et al., 2019). The durability aspect of products has been addressed in much of the literature on remanufacturing, CLSC and Product-Service Systems (PSS) (Abbey et al., 2015; Guide and Van Wassenhove, 2009; Singhal et al., 2020). Regarding customer interest and acceptance, several studies report on circular concepts and products, i.e. remanufactured, refurbished, reused, recycled or shared (see Shevchenko et al., 2023 for an overview). For some products, customers are willing to pay more for remanufactured ones when they are informed of their positive environmental or social impacts (Michaud and Llerena, 2011; Wong and Zeng, 2015). However, others report the unwillingness to compromise on quality, cost and convenience when making environmentally friendly choices (Narula and Desore, 2016).

A third critical area when examining restorative flows is logistics. Regarding B2C set-ups of circular business models, a transition is needed to move processes closer to the customer to increase the value-added of products and services while maintaining competitive cost structures. Hazen et al. (2021, p. 521) conclude that “pooling products closer to consumers and using existing and more sustainable transportation will be a key component of CE, and research advancing the operationalization of these concepts is needed.” Indeed, knowledge of how to restructure linear supply chains into circular ones is absent in existing literature. There is a need to better understand the effects of quality, quantity and timeframes for refurbished and reused products, as well as how to operate new processes in open-loop supply chains (Lopes de Sousa Jabbour et al., 2019). This transition also requires the development of appropriate logistics infrastructure (Zhang et al., 2021) and green logistics practices (Prataviera et al., 2024).

While the challenge of logistics for cost-efficient and environmentally friendly last-mile deliveries and returns has been increasingly emphasized in recent literature, the scholarly knowledge on logistics in restorative flows is still in its infancy. For example, most studies on CLSCs only mention reverse logistics and/or that the logistics network for reverse return flow is important (Guide et al., 2003; Abbey et al., 2015) but do not deeply investigate the specific operational challenges presented by reverse flows. MahmoumGonbadi et al. (2021) conclude that most CLSC literature tries to retrofit existing forward supply chains rather than build new ones on CE principles. Furthermore, while there is much research on reverse logistics, it is usually focused on linear supply chains and related to return logistics and returns management (e.g. due to quality defects or other customer concerns) or the reverse handling of end-of-life products and waste. For the first category, the focus is often on return avoidance and gatekeeping (Hjort et al., 2019) and not on products purposefully being returned to the market. For the second category, most literature focuses on mitigating the negative effects of waste and the possibilities for increased recycling and lower order “R” factors.

Guiding the circular transition, different frameworks involving different sets of “R’s” are presented and used, e.g. the 4R (reduce, reuse, recycle, recover) framework and the 9R (refuse, rethink, reduce, reuse, repair, refurbish, remanufacture, repurpose, recycle, recover) framework (Kirchherr et al., 2017). These frameworks share a hierarchy as their main feature, with the R’s being prioritized by the amount of recaptured value they facilitate, i.e. reduce before reuse before recycle, etc.

The Rs in the circular frameworks represent CE strategies to prolong product lifetimes and reduce the need for additional, newly-produced products (also denoted as slowing loops, e.g. Bocken et al., 2016). While remanufacturing is neither new in practice nor in the literature (e.g. Guide and Van Wassenhove, 2001; Guide et al., 2003), less is known about designing and managing restorative flows for the “higher level” Rs like reuse and refurbish. In existing research and practice, business models related to reuse and refurbishment fall in the domain of PSS (Li et al., 2020). While for some industries rental and user-oriented PSS models are established in B2B set-ups (Li et al., 2020), they are still in their infancy when it comes to most consumer products (Mishra et al., 2023).

Thus, while there is an increased interest in CSCs, few research studies address the integration of R-strategies with logistics processes, especially at an operational level (Nikseresht et al., 2024). The literature review identified three main themes regarding logistics for CE: logistics-related barriers and challenges, missing knowledge and needed capabilities and general observations and recommendations (see Table 1). The literature review also found that the majority of research takes place in B2B settings for industrial products (Julianelli et al., 2020) and that manufacturer perspectives dominate the literature (MahmoumGonbadi et al., 2021). Furthermore, it was found that conceptual studies dominate CSC literature (Nikseresht et al., 2024) while empirical studies on CSC are few and even fewer studies examine consumer goods (for those that do, clothing is the dominant industry examined) (Jäämaa and Kaipia, 2022).

In summary, there is a growing number of studies reporting logistics as being a critical part of the CE. However, few studies are based on, or relate to, CE-aligned business models of consumer products, and the ones identified have manufacturer-specific perspectives. Secondly, while several challenges of reverse logistics are addressed, it is mostly related to waste handling or returns of unwanted or defective products. The logistics challenges of restorative flows, i.e. products for reuse, repair or refurbishment for replacement on the market again, are much less emphasized. Thus, actual approaches for operationalizing logistics processes aligned with the R-strategies and restorative flows are missing. Finally, the role and issue of packaging in the logistics context are, to the authors’ knowledge, not addressed at all in the literature. In both forward and reverse logistics, packaging is undoubtedly a factor to consider that economically, operationally and environmentally influences the logistics processes. Escursell et al. (2021, p. 7) state that “packaging materials should not only be environmentally friendly, but also pose little problem over ‘the last mile,’ which is the greatest hindrance to e-commerce expansion at present.” Other researchers also find that the use of over-packaging is causing overuse of materials and energy (Monnot et al., 2019). Packaging presents an additional challenge when products are returned, especially to facilitate efficient handling and sufficient protection of products in the return flow while at the same time keeping packaging waste as low as possible.

Recent reports suggest negative environmental effects (Kiba-Janiak et al., 2021), and the logistics aspect becomes an even greater impact factor on both profitability and sustainability (Savelsbergh and Woensel, 2016). It is also known that vehicles dedicated to home delivery are not fully loaded (Allen et al., 2018) and that vehicles seldom add any new volumes when on delivery routes, resulting in empty running (Edwards et al., 2011).

Driven by the proclaimed potential of circular business models but with very limited empirical research reported and few successful examples in practice, a design science research (DSR) strategy was chosen (van Aken et al., 2016; Simon, 2002). Simon (2002) states that design science approaches are used to shape the phenomena of interest, as well as in the problem-solving process of shaping, identifying and mapping out themes and challenges that can be used in the process of theory building and testing. Circular business models are still emerging, and their practical implementation requires continuous adaptation. DSR’s iterative approach allows researchers to prototype, test and refine concepts through multiple iterations, ensuring that they are both theoretically sound and practically viable. The outputs of our DSR method include a logistics framework for restorative flows that provides clear, actionable stages that companies can follow to move toward circularity. Our goal is to develop new knowledge on how to make logistics processes effective and sustainable for consumer product rental models. Van Aken et al. (2016, p. 3) state that “the core product of DSR is the well-tested, well-understood and well-documented innovative generic design that has been field tested to establish pragmatic validity.” The generic design or artefact in our study is denoted as the logistics framework for restorative flows. Following CIMO (Context, Intervention, Mechanism, Outcome) logic (Denyer et al., 2008), the framework (our generic design artefact) is built on the DSR proposition of:

1. Logistics and operational processes in rental models are environmentally and effectively insufficient (problem-in-Context),

2. Applying the logistics framework for restorative flows (Intervention), including key Mechanisms (e.g. logistics re-processes), improves effectiveness and lowers the environmental impact of rental business models (Outcome).

The research design is based on the framework provided by Holmström et al. (2009), which is grounded in means-end thinking suggested by Simon (1996). The framework consists of four phases: (1) Solution incubation, (2) Solution refinement, (3) Explanation and (4) Theory advancement. In this research, the first three phases are followed, resulting in a theoretical framework explaining the phenomena under investigation. Phase 4 requires future research for testing and refinement. Each phase covers several research and problem-solving approaches as well as technical and conceptual development.

Convenience sampling was used as a pragmatic approach to gathering qualitative, contextual data from relevant actors sharing an interest in the research questions. We sought participants who would be committed to the project and could facilitate high levels of accessibility to the actual activities, processes and new practices needed to design and execute restorative flows in circular set-ups. After an initial exploration of suitable consumer product categories and circular actors, the choice of children’s products was made together with the identification of two circular start-up companies providing children’s products based on rental business models. Children’s products, such as strollers, chairs, baby seats and toys, were found ideal for rental set-ups due to the temporary usage (new demands as the children grow) and the high level of waste ending up in landfill or incineration (Levesque et al., 2022). The two start-up companies identified; Rental Company A (operated by the two founders and four part-time workers) and Rental Company B (operated by the two founders), operate in Sweden and both use a rental business model with an e-commerce platform on which customers choose and order products to rent. The products are picked, packed and then distributed to the customer. A monthly fee is paid for the usage until the customer wishes to send it back. A pick-up of the product is then booked and executed, taking the products back to the actors’ facilities for quality inspection and refurbishment. Conversations with the founders of both rental companies uncovered that logistics presents significant challenges to sustainability and low costs. In Phase 1, the research team began a working relationship with a major logistics company in the Nordic region (LSP company) that specializes in e-business. In the initial dialog, the LSP company explained how their experiences with circular set-ups negatively affected operational performance, leading to inefficiencies and increased costs. The LSP company expressed interest in improving their circular services and agreed to collaborate with us to solve a pressing logistics problem. A partnership for a formal research project was established between the LSP company, the rental companies and the University. The project was funded equally by the participating companies (50%) and via government research funding (50%). The e-commerce division, the sustainability division and the operational transport division of the LSP company were involved. All actors have invested in the design process in terms of time, commitment and involvement and have provided both competence and conceptual development of solutions for the field tests carried out in the research process (see Table 2 for more details about the actors and their involvement).

The solution incubation (Phase 1) of our DSR project started with explorative data collection. Data were analysed jointly with the involved actors and in consideration of available literature (see Figure 1 for an overview of the main processes in Phase 1).

A case study on last-mile deliveries at the LSP company’s parcel delivery operations was carried out to understand current operations (primarily classic deliveries and returns based on quality defects or customer issues) and assess how new reverse logistics processes should be designed. The case study involved three interviews with the personnel (two managers and one delivery planner) and a follow-up meeting with the managers on the identified challenges of reverse flows. From this followed a workshop with the LSP to identify critical questions and areas to further explore, in which representatives from their sustainability, e-commerce and operations divisions took part. It also led to the documentation and design of new practices needed for taking back products for consumer reuse and not just to satisfy reclamation regulations.

Together with Rental Company B, 13 interviews were conducted with potential customers with an emphasis on the delivery, usage and return of toys. At Rental Company A, feedback from their operations and customer service was analysed together with the CEO and customers willing to participate. Customers emphasized problems with booking, receiving and returning rented products. After three months of participation in the study, Rental Company B paused its operations due to a lack of financing and left the project. The first phase also included a narrative literature review with a focus on last-mile logistics and CSCs, especially as related to consumer rental business models. A broad search using Web of Science, Scopus, Google Scholar and Internet searches was performed to gain knowledge from published literature. A summary of the main results gained from the literature review is presented in Table 1.

Based on the empirical work and analysis of the literature, the logistics re-processes were confirmed as a key mechanism, which was often hindered by geographic distance. This led to the first generic design (GD-a) of the logistics framework for restorative flows, including two major key mechanisms, namely: logistics re-processes and geographical proximity.

Each actor evaluated the first framework (GD-a), followed by a 2-h joint workshop with two researchers, the two founders of Rental Company A and three representatives from the LSP company to discuss and evaluate the mechanism identified and the overall framework. It also entailed discussions of what competencies and resources to include for the coming field test. The evaluation also led to the inclusion of packaging as a key feature for circular flows. Packaging issues were mentioned in the customer feedback, both related to convenience and environmental concerns. For example, when returning products, customers did not have suitable packaging (the one used when products were delivered 6–12 months before was already lost), and in reasoning about the positive aspects of circular products, some customers raised concerns about packaging waste and it not being circular. This resulted in the development of generic design b (GD-b), which also included packaging as a key mechanism. It also led to the inclusion of a packaging company in the project. The chosen packaging company – a global and market-leading actor in fibre-based packaging and packaging materials – had a clear vision of expanding its portfolio with new types of business opportunities, especially related to CE. The head of innovation at the packaging company and the lead researcher held previous discussions about packaging and logistics challenges with respect to bio-based materials (e.g. corrugated board). When the insights gained from the project were brought up in a new conversation, she expressed a clear interest in participating in the project. With the agreement of the other partners, the Packaging company became a formal project partner. The company began by developing a reusable packaging solution made of corrugated board. Six representatives joined the project team from the packaging company (see Table 2). The packaging company took an active part in exploring the insights and potential effects of the research project and the field tests to be performed.

The second phase began with the design and manufacturing of a reusable packaging solution (biobased, corrugated boxes in three sizes) to be included in the test (see Figure 2). Rental Company A updated its website with new delivery options, and the LSP developed instructions and information sharing protocols with involved personnel. The IT systems between the LSP company and Rental Company A were integrated to support information sharing. Furthermore, new processes were developed for packaging-free deliveries where drivers use reusable boxes during transportation, but then unpack the product for delivery and repack the product when the customer is ready to return it. The new processes included standardized procedures for the drivers to follow, which also served to enhance the customer experience.

In the solution refinement process, meetings were held regularly (bi-weekly) for 11 months (Phase 2), as well as regular workshops during and between field tests. Between two and eleven company representatives were present in each meeting and workshop. Follow-up interviews and meetings were held with selected representatives for clarity. An online whiteboard was used for the planning and execution of the project and the field tests. On the online whiteboard, relevant literature, process maps for product and information flows, project planning information, workshop results and key decisions were documented and accessible for all parties during the project (see  Appendix 1). Furthermore, minutes were taken and shared after each meeting and documented for the research process (see  Appendix 2).

The design of Field Test 1 was conducted jointly by all parties and included the setup of digital portals for ordering and managing logistics processes between the LSP company and Rental Company A. Since the emerging business construct was new to each company, new processes for delivery and pick-up were designed.

Field Test 1 was carried out in Rental Company A’s normal business setting (i.e. no price discounts or dedicated test-customers were used) in Stockholm, Sweden. The field test was also integrated into LSP operations to gain insight into logistics process effects from (1) the new delivery and return processes, (2) using the returnable packaging and (3) the new packaging-free delivery and pick-up process. In Field Test 1, most orders were prams, strollers and baby seats.

Over 6 weeks, 21 products were delivered, and 9 products were picked up. For three of these occasions, a researcher was present observing the handling and interviewing the customers about the delivery experience and the truck drivers. In the bi-weekly meetings, adjustments were made, and insights were shared. Follow-up interviews were also held with six customers, three drivers and three warehouse workers. The six customers interviewed were randomly selected from the 30 customers who received a delivery or returned a product. A researcher scheduled and conducted semi-structured interviews by telephone (see  Appendix 3 for the protocol) lasting for 20–30 min each. A researcher conducted interviews with warehouse workers, LSP managers and drivers. Notes were taken and shared among the project participants.

Insights, experiences and data from Field Test 1 were then analysed, on both a process level and company level and presented at two joint workshops with four to five representatives from the actors involved. The first joint workshop focused on the data collected from customers and LSP personnel, as well as from the analysis of the returnable packaging. The second workshop focused on obstacles and challenges to further development and implementation. A key insight was that the LSP was having difficulty handling the packaging (boxes) as return units, which led to all 35 boxes being left at customer locations or put in the recycling bin after one usage.

Considering the need for further refinement, the project team agreed to conduct a second field test, expanding on the key learnings from the first round. From the customer interviews and observations, two major insights were gained. Firstly, customers were surprised but overly positive about packaging-free deliveries. Secondly, with the increase in rental customers, a trend of shorter rental periods was observed in the data. This, in turn, drove more deliveries and pick-ups as well as refurbishment. The primary insights from Field Test 1 triggered 1) refinement of the packaging design and 2) updated and improved dissemination of LSP procedures for product distribution and collection, including the packaging-free service and 3) updated information provided to customers (via e-mail) when they end a subscription regarding how to prepare their returned product and the packaging free delivery concept (i.e. that they do not need to pack the returning products but make it ready for handover to the driver).

Based on conceptual discussions among the participants, the rental period was added as a fourth mechanism in the logistics framework (Generic design-c).

Field Test 2 spanned eight weeks, with prams, strollers and baby seats as the main products. We continued to hold project team meetings (one or two per week) in which practical aspects were discussed, and key insights were documented. We conducted a mid-term review and a final, summarizing workshop. The questionnaires were developed based on iterative feedback and survey and interview data were gathered throughout the entire test period. In total, 21 drivers completed 29 deliveries, 14 pick-ups and 3 product swaps during Field Test 2. In addition, all customer feedback received during the period by Rental Company A was included in the analysis.

Theoretical development was ongoing throughout the research, involving literature analysis, theoretical reasoning and reflections based on the data gathered and the dialogue within the project team. Presentations and discussions of work-in-progress articles at academic conferences and meetings were also used in the process. In Phase 3 – substantial theory development – the final analysis and synthesis were then made from the activities in Phases 1 and 2, and the theoretical contribution and development was further developed into a proposed Logistics framework for restorative flows (final generic design) (see Figure 3). The work entailed analysis of all data and experiences together with selected key sources in the literature relating to the different phases and challenges of CSCs and logistics. The outcome of the theoretical development phase is presented later in the discussion section.

Conducting DSR entails a continuous interplay between theoretical reflections and practical development and testing, where the emerging insights gained from various interactions and individual reflections do not follow a set plan or can be reductionistically derived in hindsight. In this research alone, data collection and analysis took more than 1,000 h and included several hundred interactions among project participants (e-mails, phone calls, interviews, meetings and observations). Table 2 contains an overview of the companies and primary participants. The following measures were taken to maintain validity and reliability:

1. A joint online whiteboard was initially formed, available for all parties involved in the project enabling transparency. The whiteboard was regularly updated with theoretical frameworks, project results and insights. For example, key results from the initial literature interview, as well as each version of the artefact were published. Before the workshops, each actor placed their collected data and findings from the field tests on the whiteboard. The whiteboard was then used for documentation during and after the workshops (see  Appendix 1). Owing to geographical distance, most workshops were held online and jointly moderated by the lead researcher and a company representative.

2. During the field tests, regular joint meetings with representatives from all actors (weekly or bi-weekly) were held. Meeting notes were taken and shared with participants.

3. With the two subsequent field tests carried out, it was possible not only to gain insights into what did not work but also to make adjustments in near real-time to make practical improvements.

4. Multiple sources of evidence (e.g. interviews, photos, observations, testing and literature reviews) and open and documented discussion during meetings and workshops confirm that the constructs were correctly captured.

5. Interviews were conducted, adhering to guiding protocols and copious notes were taken.

6. Each actor provided between four and six participants from higher levels of management (see Table 2), specific operational functions (e.g. production, design and customer relations) and support functions related to IT and sustainability. Broad commitment from several levels demonstrates both the strategic value and operational, practical insights of this research.

Engaging in a circular business concept and executing new circular practices were novel for all parties. The main processes that were identified or designed during the field tests, and thereafter analysed, are illustrated in Figure 4.

Customers initiate a transaction with the rental company via the company’s website, triggering a booking request involving the LSP. Three service options are available: delivery, swap and return. One or two times a week, the LSP picked up packed products for delivery and swaps or empty boxes for returns, at one of the central terminals in Stockholm, from where most of their parcel deliveries were distributed to customers. When registered at the terminal, a text message was sent to the customer, from which the customer could choose a delivery time.

Product delivery and pick-up were integrated into all other deliveries in the Stockholm area to maximize route efficiency. For delivery and return processes, the product handover from the driver to the customer was “packaging free” in that the driver took out the reusable box, opened it in front of the customer and handed over the product. For returns, the driver took an empty box and brought it when meeting the customer and then placed the returned product inside for return delivery to the terminal. At the LSP terminal, boxes were kept and brought back to the rental company when new orders were picked up.

For the customers, the process of delivery was similar to any home delivery, while for returns, they were asked to prepare the products for easy return handling (e.g. folded and complete). The packaging-free delivery was novel for customers when both receiving and returning rented products. Product and empty box returns at the LSP triggered the refurbishment process at the rental company. Items were inspected and then dispositioned to the suitable refurbishment option (e.g. cleaning, change of parts and safety checks).

For the LSP, both parcel delivery to and returns from customers constitute ordinary business processes. However, the set-up of a reusable box for parcel handling, which was also used for returns, as well as the set-up of swaps was novel. Before Field Test 1, new informational material was produced, and informational meetings were held with the LSP’s personnel (distribution centre workers and drivers). As such, the fact that all 35 boxes disappeared in Field Test 1 (left at customer locations or put in the recycling bin at the terminal) came as a surprise. Hence, even if the boxes were branded with logotypes and labels indicating reusable boxes, and information had been given to both driver and terminal personnel on how to handle them, the prescribed practices were not followed. Consequently, more work was put into developing new processes and practices, which were documented and communicated both orally and digitally. A key aspect of this work was the classification of boxes as accountable assets. This work included more detailed instructions, first discussed with site management personnel and then in joint meetings with warehouse personnel and truck drivers. Furthermore, in the digital portal the driver uses on the delivery routes, the boxes were added as assets with instructions on where to place them when returning to the terminal after deliveries. While there was only one lost box in Field Test 2, participants indicated that there was too much effort needed from site managers to get the boxes to the designated areas in the terminal and then back to Rental Company A for refurbishment.

Thus, subsequent insights were gained related to the product flows and the box handling at the terminal, which led to improved practices but also to new challenges. With an increase in product flows, it was found that the unique boxes drove additional logistics complexity. At the terminal, the boxes were handled on pallets and stored in a separate storage space. Since they were designed to be stackable but not foldable, they took twice as much space as other folded boxes. Hence, in a scaled-up scenario, this presented a notable challenge. In the terminal setting, especially if other customers also use their reusable packages, this would increase cost and reduce space efficiency. Furthermore, while practices improved in handling the boxes as assets at the terminal and when delivering products, the return flow of empty boxes to Rental Company A for re-usage was a hurdle throughout Field Test 2. Dedicated efforts from managers to track and execute the reverse flow were needed. Again, a new practice that needed extra efforts to manage and get going in the ordinary business setting.

Regarding the deliveries and returns, the stop time during deliveries was slightly longer compared to ordinary deliveries. Taking out a box and handing it over to the customer versus taking it out, opening it, handing over the product and then placing the box back in the truck added approximately one to two minutes. However, it did not affect the total stop-time as it was done while waiting for the customers to open their doors. For returns, it was found similar, i.e. receiving the product and placing it in an empty box added around a minute, if products were prepared by the customers. On one occasion, the return of a stroller that was not folded led to time spent by the driver first trying to fold it and, in the end, it had to be transported back unfolded. These insights led to Rental Company A improving their instructions for customers on how to prepare the products before returning (e.g. folding, including all components, etc.). Overall improvements were observed in Field Test 2, where customers better prepared the products to be returned, with only a few occasions of problems reported of unprepared returns. From the follow-up interviews and joint meetings with the drivers, all expressed their positive impression of the concept and that the new practices of unpacking/packing boxes when delivering to customers worked well for them. Hence, for the LSP, the key findings are that the new delivery practices, including a reusable box, work well in distribution, while the handling of reusable boxes at the terminal causes logistics complexity.

The initial interviews and experiences from customers to both Rental Companies A and B (Phase 1) revealed that the interest in renting instead of buying children’s equipment and toys was a combination of convenience, cost-efficiency and being good for the environment.

From both field tests, the overall impression from customers was positive. All of them were used for e-commerce and had used several other services for home delivery of products before. Consequently, they were pleased with the ability to book a timeslot online for delivery or return when contacted by the LSP with a text message. While there were several comments by customers during Field Test 1 about how to return products and prepare returns, the improved instructions from Rental Company A for Field Test 2 led to only one customer question about how to prepare returns. Clarifying instructions were appended to the existing return preparation email, stating that customers are responsible for folding prams and strollers and having all items ready for pickup (i.e. including the stroller umbrella or the bicycle mount they had added to the stroller or the baby seat).

Customers expressed the most feedback concerning the packaging-free delivery and return process. One customer exclaimed, “The experience of not keeping the box was surprising,” and another, “Good with a package free delivery—easy for me and good for the environment.” Yet another customer said, “It’s great that the driver took the box with him, so you don’t have to go out and throw it away yourself or have it lying around somewhere until returning the product. Wish everyone did that so you could get rid of the rubbish.” Hence, the packaging-free delivery concept provided both customer convenience and environmental sustainability benefits.

Another observation is the notion that the driver and the delivery have a profound impact on the total product experience. The new set-up with hand-over of actual products added a service element that enabled contact between the driver and the customer, something that both parties found positive. Hence, for home deliveries, there is the potential for adding extra services, which also require new driver competencies, especially related to customer interaction.

Rental Company A made two major changes to its existing processes related to logistics and delivery. In their ordinary setting, they used dedicated deliveries for their customers in the Stockholm area, typically having six to eight stops per route. By partnering with LSP, which delivers parcels several times per day in the region, both customer service and environmental impact per delivered or returned product could be improved. The established text message service, together with several choices of delivery and pick-up timeslots at the LSP, gave customers more flexibility. Using the LSP, the deliveries were made on the ordinary delivery routes with 40–60 stops per route. Hence, the environmental impact of deliveries decreased, which strengthened their sustainability profile.

Concerning customer service aspects of packaging, the previous practice was to use the original packaging for all deliveries and then it was up to the customers themselves to fix a packaging solution when returns were made. Previous experience from customers was that several of them kept the original packaging and used it for returns as well. However, since the original packages were optimized for new products, most used products were not easily repackageable because they could not be perfectly folded or otherwise condensed to their original shipping state. This led to reduced re-packing inefficiencies and frustrations, broken and unclosed packages. This degradation led to the inability of the package to be used more than once. Customers disapprove of packaging that is taped or otherwise repaired, which provides an unpleasant impression of the products as dirty or inferior. The new set-up was met with a positive response from customers and it enabled the delivery and pick-up of used products in branded, well-performing and attractive boxes.

The new packaging solution provided some challenges in Rental Company A’s operations. Considering the limited number of available boxes, the guiding principle was to return both boxes with returned products and empty ones from the LSP on every occasion. Owing to insufficient practices at the LSP terminal, there was a delay in returns, causing both the obsolescence of boxes when new orders came in and products being kept for a longer time than needed. Personnel were required to spend time and effort tracing these at the LSP to get them back or find other packaging solutions. Hence, the integration of new practices in new business models (collect and refurbish products as quickly as possible) and the need for storage and accounting for boxes represent key findings.

Our research confirms that product re-capability and customer involvement are vital elements when designing and managing restorative flows for the “higher level” Rs like reuse and refurbish. Our findings demonstrate how logistics is the backbone of these resource restoration efforts. The integration of R-strategies with logistics processes for resource restoration requires optimizing the usage and allocation of resources in both time and place. Furthermore, at the operational level, we found that efficient handling and product protection with minimal increases in waste (reusable packaging) and providing customers with appealing services (e.g. packaging-free deliveries) are key to the transition from linear to circular offerings and business models. Based on previous conceptual research on CSC and R-strategies (Mishra et al., 2023; Nikseresht et al., 2024), this research provides detailed insights into the operational level of restorative flows and adds four critical logistics factors to the theory, all identified as central in the design and establishment of circular business set-ups. These are: (1) Geographical proximity and distance, (2) Rental periods, (3) Packaging and (4) Logistics (re-) processes. Each factor is further discussed below, followed by our proposed logistics framework for restorative flows of consumer products where the factors are integrated.

Extending Reyes et al.’s (2017) findings about the value of denser geographical areas for circular set-ups, our research provides empirical evidence for geographical proximity to keep costs, environmental impacts and lead times low. We find that there is also a need to have control of new processes developed by, or co-developed with, their supply chain partners. Thus, due to the novelty of reuse and refurbishment operations, close geographical proximity is a recommended best practice when developing and implementing restorative logistics practices. Thus, key questions to answer when setting up a rental business model relate to customer density within the restorative flow network (i.e. distribution distances) and the implementation and control of new, competitive business processes. That said, we hope that the geographical proximity factor will become less challenging as businesses improve the efficiency and scalability of their processes.

Consumer products tend to have product use lifecycles ranging from a few hours to a few years. For the products investigated in this study, customer product use lifecycles range from 6 to 36 months. The rental periods are highly dependent upon product characteristics such as usage frequency, intensity and time. Each customer order generates a full logistics cycle, including handling, delivery, packaging, return and reconditioning processes. Hence, when implementing rental B2C concepts, the rental period length will directly impact the design of restorative flow transportation and refurbishment networks.

The logistics impact of rental or usage periods in restorative flows of consumer products is, to the authors’ knowledge, not treated in related literature. Kühl et al. (2023) in their study of rental models in B2B settings (computers and power tools), include aspects of wear and tear of the products, which influence the reconditioning needed but do not consider the transport or handling for reverse flows. Both Keldrap (2021) and Mont et al. (2006) study rental concepts of prams and strollers but do not consider the logistics aspects in their setups and analyses. Finally, in the study of enhanced circularity in aftermarkets, Gatenholm et al. (2021) provide several models of logistics flows related to repair, maintenance, reuse and refurbishment but do not include the logistics impacts from the frequency (maintenance intervals or usage periods). Hence, our research extends this literature by showing how rental periods are another key area to consider in the CSC set-ups of rental business models, as it will influence the number of restorative cycles that impact both financial and environmental performance. Regarding the identified challenge of balancing supply and demand (Mishra et al., 2023) and estimations of available quantities of products (Zarbakhshnia et al., 2023), we find that the setup of rental periods (weeks, months) enables better control of the inventory. This enables better planning for recovery transportation and informs when products are available for a new rental cycle.

Providing accessibility to new product models and options, rental business concepts might lead to new customer behaviours in changing products more often. This was observed in our study when some customers, enabled by the rental model, rented a new model or a new colour of their pram every second month. From a financial perspective, with the right pricing, this might be sufficient, but from a sustainability perspective, it causes more rehandling cycles, increasing transportation and reconditioning requirements (Kerdlap et al., 2021; Levänen et al., 2021). Similar consequences have been observed by Kühl et al. (2023), where the growing speed of fashion and technological developments affects product lifetimes and thereby inhibits the potential for reuse. Our study extends Kühl et al. (2023) by finding that a customer segment strategy could be used based on customer preferences and price settings.

While packaging has been addressed as a major challenge in e-commerce (Hao, 2021), the role of packaging in CSCs and circular business setups for consumer products is less understood. Our findings contribute to this literature by showing that when evaluating the use of reusable packaging systems for circular business set-ups versus the use of single-use packaging solutions with high recyclability and incentives to recycle, it will be important to assess actual environmental effects. Furthermore, as confirmed by the customers in our study, the concept of packaging-free deliveries also increases the convenience for the customer and could be regarded as a part of the service value proposition. That said, using reusable packaging certainly adds complexity to the logistics processes, as experienced in our study and supports calls for further inquiry and the development of new processes and practices (Prataviera et al., 2024).

While forward logistics processes functioned well, the integration of new reverse logistics processes was found to be critical in this research, both regarding efficiency and environmental impacts. It is also affected by the geographical proximity and density, rental period and choice of packaging. Furthermore, customer interactions change as customers become more involved supply chain actors, vice receivers at delivery endpoints, bringing several new logistical challenges.

The logistics for circular set-ups of rental models of consumer products is similar to any product delivery in the forward flow; however, it requires deliberate return flows of used products (i.e. returns or swaps), re-handling processes (i.e. refurbishment or reconditioning) and replenishment of products for new orders, to provide customers with high-quality (good as new) products.

Regarding delivery routes, the inclusion of product return pick-ups on existing routes is highly promising and will increase the utility of vehicles without increasing route length. Taking both a volume and a weight perspective, it is commonly acknowledged that vehicles dedicated to parcel delivery are not fully loaded (Allen et al., 2018). However, as learned from our study, the actual practices of including pick-ups or swaps on routes were new to the LSP company. The common understanding of logistics personnel was that returns are “wrong” and related to a product being damaged or unwanted; hence, it would be treated accordingly. Consequently, the establishment of returns as a new practice demanded new routines, education for employees and new packaging solutions.

In a circular setup, the products need to be handled quickly to be put on the market for new users, both for financial and resource utilization purposes. Here again, it was found that the current logistics practices at terminals build on returns not being prioritized, as product owners have not demanded fast handling for returned products. Consequently, several returned products were kept for days or even weeks before being returned to Rental Company A for refurbishment and preparation for the next customer. This was also a critical component of the packaging-free concept tested in our study. Hence, while Zhang et al. (2021) conclude that LSPs are central in designing the regenerability of resources, there is a need to develop new processes and competencies, such as those developed herein, to enable restorative flows and CSCs. The role of reverse logistics in restoring value is central, but the principles of CE have to be incorporated in both strategic planning and operational processes (Julianelli et al., 2020) among all supply chain actors involved.

Considering the themes identified in literature regarding logistics for CE (Table 1), this research provides several theoretical contributions regarding the advancement of logistics for CE, both related to the barriers and challenges. While each of the four factors is interesting in its own regard, our analysis also shows how they interrelate and can be integrated to overcome identified barriers and challenges, as presented in the logistics framework for restorative flows of consumer products (Figure 5).

Reverse logistics is often highlighted in related literature (De Lima et al., 2024; Koers et al., 2024), and our research contributes by demonstrating the importance of integrating forward and reverse logistics (i.e. logistics (re-) processes) when developing and sustaining restorative flows. We also show how, in addition to geographical proximity, rental periods and packaging also impact logistics (re-) processes. Thus, by integrating these factors, the complexity surrounding restorative flows addressed in previous literature (e.g. Yu et al., 2022; Zarbakhshnia et al., 2023) can be reduced by adding predictability of returns as well as reducing uncertainty in lead-times by adjusting rental periods and geographical proximity. Our research shows that challenges related to product handling (e.g. Mallick et al., 2023; Butt et al., 2023) can be mitigated with appropriate packaging and the development of new practices.

The proposed framework with the identified processes and factors forms key constructs for theoretical refinement that should be broadened with more empirical research.

This research contributes to CSCM and CE by providing insight into the logistical operations supporting restorative flows for reused consumer products. Two important theoretical contributions are offered. Firstly, this study theorizes what constitutes logistics for restorative flows. While some components of logistics for restorative flows (logistics network design, forward and reverse logistics) have been addressed in CLSC literature, the context of B2C rental models is novel. In addition, the examination of rental periods and packaging is novel. The findings outline the critical factors so far identified for a circular business setup, proposing a logistics framework for restorative flows.

Secondly, the findings demonstrate how customer involvement in logistics and, in particular, when receiving and returning products, is vital to success. Key logistics issues identified relate to customer availability for both delivery and returns, and preparing products for return (e.g. having all components ready). Customer availability for delivery and returns is rather well known in logistics and relates to failure rates of deliveries ranging from 2% to 30%, depending on the product and geographical region (Edwards et al., 2010; Buldeo Rai et al., 2019). The combination of complete returns has become critical for circular concepts. Hence, to enable products to be out for rent again, it is crucial for returned products that consist of several parts (e.g. an umbrella for a pram or an attachment for a bicycle seat) to be complete when returned. If not, everything is returned when the pick-up is made and a new shipment is necessary, driving both cost and environmental impact up, as well as causing more time and energy for the customer. This concern implies that the rental actor needs to inform the customer about what to return and in what way (e.g. folded, charged, pre-packed, etc.) and then clearly communicate the coordination of when to return a product with the LSP.

Regarding practical implications, the study provides insights into the most pressing pinch points that managers face when designing and implementing logistics processes for restorative flows. Managers can use our suggested framework to inform the development, implementation and improvement of reuse concepts. The need for reusable packaging became evident in the study, both to minimize packaging waste and in the desire to be truly circular in both the reuse of products and packaging. Packaging is also a cost driver for the circular actors and a hurdle for end customers. For the LSP company, handling increased flows of packaging for reuse was challenging and demanded new practices to be developed and implemented. It also needs the development of green logistics practices, which are still found insufficient in both research and practice (Prataviera et al., 2024).

While the DSR approach provides an in-depth understanding of the actual logistics practices in the context of circular business operations, some limitations deserve mention. The focus on children’s products and the context of Stockholm, Sweden, provides a limited scope for more general insights into the operations. Hence, more studies of other rental products in other contexts are needed. Following the framework by Holmström et al. (2009), we came to Phase 3 in proposing a theoretical framework and providing explanatory theoretical insights. The logistics framework for restorative flows needs further refinement from more empirical studies. Further research is also needed on the emerging processes related to the reconditioning of reusable consumer products.

The authors wish to express their sincere appreciation to the reviewers for their valuable insights and constructive criticism, which have greatly strengthened this paper.

Examples of documentation from the online whiteboard. Source: Authors’ own work.

Minutes from one of the regular project meetings. Source: Authors’ own work.

Interview protocol – customers

Hello!

I’m contacting you regarding a research project that [Rental company A] is participating in. My name is __________ and I’m a researcher from __________ University.

The questions that we’re asking are part of a larger research project with many participants. No personal contact details will be shared or used in the project. We will only use your feedback for research and process improvement purposes.

How was your overall experience with the recent delivery and/or return of product x?

Did you get enough information before the delivery and/or return? Were there something missing?

Did the products live up to your expectations? Did you miss anything?

Did the delivery and/or return live up to your expectations?

How was your experience with booking the delivery and/or return?

Explain how the hand-over (either from the driver or to the driver) of the product worked?

Do you have any other comments or reflections that you would like to share?