The Logistics Of Compassion

How supply chain companies get involved with charities

- Matthew Flynn

When people think of philanthropy, the first thoughts that pop into mind usually concern contributing money to nonprofit organizations or volunteering to help the less fortunate. Supply chains are generally not top of mind when one considers charitable donations. However, as the importance of corporate responsibility continues to grow and new options for philanthropic initiatives arise, supply chains across sectors are becoming more involved in charitable work.

Product Philanthropy

Inventory management is one of the most important aspects of being a reliable link in the supply chain. As such, many warehouses make every possible effort to be able to fill orders as they come in. Sometimes this leads to being overstocked on certain items. In order to free up space in overcrowded warehouses, overstocked items must sometimes be moved.

A great way of eliminating overstocked items is product philanthropy, which is a process of donating unwanted items to nonprofits that can also result in significant tax deductions for companies with a lot of excess inventory. IRS Code Section 170(e)(3) discusses charitable donations of inventory and explains that companies can deduct the cost of the inventory plus as much as half the difference between its market value and its cost. Companies such as Walmart and Tempur-Sealy are known for delivering truckloads of overstocked goods to nonprofits with which they work.