Commentary on Current Issue: Determining the Optional Donation Acceptance Policy for Nonprofit Sectors

COMMENTARY ON CURRENT ISSUE: Determining the Optional Donation Acceptance Policy for Nonprofit Sectors

Matthew Leonelli (212920534)

Professor John Milne

MGMT 3200 Section A 

6th October 2015

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        Through authors Robert Sharer and Kelly Carpentier’s study of Habitat for Humanity’s

ReStores, a nonprofit store that sells donations to help fund homebuilding, a solution to our nonprofit store’s lack of a donation acceptance policy is presented. These ReStores have an overflowing supply of donations, yet no criteria available to guide managers on what to accept. This often results in suboptimal performance, and thus an urgency for a donation acceptance policy prompts the authors to suggest a two-step remedy through the use of operations management. First, linear programming is harnessed to find an efficient acceptance quantity of each of the three highest revenue generating products. This creates a product mix that allows revenue to be maximized given constraints in supply, demand, and store space. The second step involves a simulation of operations under varying factors, such as the amount of store space available, resulting in an analysis of different revenue distributions given different scenarios. Aggregating these two steps finds an efficient acceptance quantity that increases revenue up to 20%, which is significantly beneficial seeing as nonprofit stores such as ours often have a dependency on donated items as the sole revenue stream. Thus, using this allows operations to occur under more lenient financial conditions, leading nonprofit stores to continue providing societal benefits without financial disruptions.

Through critical analysis of the author’s donation acceptance policy, its evident that their findings would yield our organization vast increases in efficiency, a benefit that is already being exemplified through its implementation at two Habitat for Humanity affiliates in California and Virginia. The adaptability of this methodology will allow these benefits to be spread to our nonprofit store as we too rely on the resale of donations, overcoming our tendency to neglect the financial bottom line without losing sight of our social mission. As a result of this, the additional revenue can then be used to fund projects in other areas of our organization, allowing for the expansion of our social reach. Additionally, this approach yields insights for our nonprofit managers that differ from its primary goal of finding what donations to accept. It is possible to determine how much the price of a product can change without changing the efficient acceptance quantity, allowing us to create a range of flexible prices to offer products at. Also, our managers would have the ability to determine the effect on revenue given a unit increase in the value of each product sold, allowing us to market products that increase revenue the most. Additionally, this will allow you to better direct the organization’s strategy through being able to identify an optimal store size and predict future revenue with greater accuracy. This solution, however, relies on historical data and a knowledge of linear programming, thus, it would be beneficial for us to first determine if our turnover ratio is acceptable, and if not then invest into this strategy. In closing, this approach would abolish the presence of our financial stringencies, allowing us to emerge victorious by maintaining the organization’s social bottom line with greater comfort, and as a result, spillover of this benefit to the general society will materialize through the promotion of the common good.