Donation programs in supply chains (from the Elsevier Reference Module in Social Sciences)

Engaging in philanthropic activities is being pursued by many well-established supply chains. Donations are a form of charitable activities that not only promote the social responsibility of a corporation but also enhance its public image, which in turn creates more benefits for the supply chain. Prosocial preferences of customers are considered the primary drivers that persuade supply chains to donate. In this chapter, various donation programs within supply chains are introduced, and the challenges associated with them are briefly discussed. Then, based on recent literature, an optimal donation program for a two-echelon supplier-retailer supply chain is discussed, where the supplier engages in a per-sold-item donation program. The optimal donation rate is derived for the supplier, and then a donation-cost sharing contract is discussed, which can align the supplier's interests with the entire channel's in optimizing the donation rate. Findings from the models show that collaboration between both members in donation decisions results in a higher donation rate. Additionally, the results indicate that the product's marginal profit needs to surpass a minimum threshold to make the product eligible for a per-sold-item donation program. Finally, takeaways for operations managers and researchers are provided, and future research directions are discussed.