5 Ways Corporate Philanthropy can be Central to Inventory Management

Corporate philanthropy is typically viewed as a mix of generosity and marketing – a way for a company to help their community while also promoting their brand. However, companies are increasingly seeing the wider role their philanthropic endeavors can play in overall strategy, including inventory management.

By integrating philanthropy into stocking and product-mix choices, a company can get the best of both worlds – effective inventory control and meaningful altruism. Here are five ways:

Plans to donate unsold goods reduce stockouts

When a company, like WalMart or Panera, makes a commitment to donate excess inventory as part of their corporate giving plans, it provides a motivation to carry extra inventory stocks. These extra inventory levels can ensure shelves aren’t empty, even when there is a sudden surge in demand. In an age where supply shortages are becoming an increasingly important risk to companies’ bottom line, strategies like these that boost inventory buffers too are critical. And, when demand turns out to be unusually low, the downside is not as pronounced since it merely triggers a meaningful donation to support communities.

Agreements to donate inventory aid learning about customer needs

Since inventory donation programs encourage extra inventory on-hand and limit stockouts, it also means that companies can get a better feel for customer needs. After all, an empty shelf is a sign that customers demanded more than expected, but it’s not clear how much more. When shelves are fully stocked, however, the precise demand is apparent since it mirrors realized sales volumes. Recent research conducted with colleagues confirms that understanding customer needs can be a powerful motivator for establishing inventory donation programs.

Inventory donation programs reduce waste

When a seller makes a commitment to donate excess inventory as part of their corporate giving plans, it also provides a more environmentally-friendly use of unsold items. Helping those in need also means less merchandise in a landfill, a win-win. This ability to reduce environmental footprint is a primary motivation for Amazon’s program incentivizing third-party sellers to donate unsold items.

Giving inventory can bring an added tax break

If a company opts to donate extra inventory to charity for use to help feed those in need, not only does it help those recipients, it also permits an “enhanced” tax deduction. The tax incentive, in IRC §170(e)(3), is considered enhanced because the deduction from taxable income is not just cost but rather is cost-plus, reflecting a markup due to retail price being above cost. This means that donated inventory can drastically reduce a company’s tax bill. In previous years, these enhanced incentives have been expanded to include donation of other items, like books and computer equipment, so it’s important to keep an eye on changing federal tax incentives that can reward other giving programs too.

Tying donations to specific item sales can boost fledgling product lines

Though much of inventory-related donations entail giving unsold inventory, sometimes companies also tie giving to sold inventory. The buy-one-give-one model, popularized by TOMS, is a case where matching donations of products are made when customers buy items. Other linkages to sales, like Subaru’s Share the Love program, tie cash gifts to sales, either of specific product lines or during a particular event. Not only can these efforts increase the appeal of products and the brand for consumers, but it can also introduce consumers to new or struggling product lines and jumpstart their appeal.

Giving back is, itself, a notable way for companies to connect meaningfully with the communities they inhabit. When it is brought into inventory management, the impact on the company can be even more pronounced. Thus, it is best to see corporate philanthropy not as a company’s side project but rather an integral part of overall strategy.