Cooperative Donation Programs in Supply Chains With Non-Governmental Organizations (NGOs)

Abstract

Today, corporate social responsibility (CSR) is known as a critical element of supply chain (SC) operations. In this article, we analytically study an SC coordination problem with social efforts for charity. The proposed SC includes one retailer and one manufacturer in which the manufacturer gives donations to a nongovernmental organization (NGO) in two forms, namely a lump sum amount plus a per-sold-item donation amount. While CSR efforts have been considered as an abstract concept in prior studies, this article contributes to the literature by specifically exploring an SC with an NGO in the form of two types of donations as CSR activities. The problem is first modeled under a decentralized decision-making setting in which each member focuses on its own profit. The second model is developed under the centralized decision-making structure in which the whole SC profit under the centralized scenario is improved. To achieve Pareto-improving channel coordination, a cooperative donation program using a combined “wholesale price and cost-sharing” contract is proposed. Our analytically proven results demonstrate that the proposed SC coordination contract can achieve Pareto improvement. Moreover, we prove that the NGO receives more donations under the proposed contract. Therefore, the proposed contract is beneficial to both the SC members and the NGO. In the extended model, we investigate the case under the endogenous “low/high pricing regimes” and reveal that the main findings remain robust. Managerial insights and implications are discussed.