Field inventory management (FIM) in the Medical Device Industry – Create capitalized assets and fulfill demo requests orders from sales representatives

Introduction:

This blog outlines the leading medical device industry business process steps to fulfill a customer request for demo of a capitalized equipment.

A customer may request a particular product from your company to be demonstrated and evaluated before making a purchase decision. If the product is of high value, the company may treat the product as an asset when it is used for demo purposes. The below document will explain tracking, logistics support, and accountability of these products when they go out to the field from the company’s premises.

Asset Creation and Categorization

- Create capitalized assets during receipt into the designated Inventory pool.

The company policy may set aside a sizable quantity of products for customer demonstration purposes to pursue sales or marketing opportunities. If these products are of high value, we should create a separate pool of inventory inside single or multiple warehouse locations, this should generally be created as valuated Assets in the Fixed Asset ledger, but remain in the company’s inventory at zero value, to avoid double counting in the balance sheet. Products intended for sale are not capitalized.

This creation of assets in the system happens at the time of setting aside as a separate pool through the material document posting.

- Create capitalized assets when the product is sent to the field.

Due to supply and demand imbalances, companies may not always have a sufficient pool of inventory for demo purposes, in these cases, they may decide to send a product intended for sale to a customer demonstration. When a product intended for sale is sent to the field consigned to a customer for demonstration purposes a valuated asset needs to be created in the fixed asset ledger

- Tracking & Depreciation

Maintaining demo products in a separate pool in the warehouse and tracking products sent to the field as consignment for demo purposes enables the tracking of Assets and the posting of depreciation expenses over the life of the Asset while retaining the visibility of inventory in both Pools and Consignment

System Process Steps:

Create Assets and store them in a dedicated demo pool

Capitalized assets should be created when goods are received or transferred into the dedicated capitalized inventory pool. This could be achieved either using a standard purchase order, intercompany purchase order, or a transfer posting in S4 Hana. Standard programs may need to be enhanced to achieve this function.

Send a capitalized demo pool of products to customers for demonstration purposes.

Based on customer demand, the need may arise to demonstrate products at customer premises for sales and marketing purposes. This could be achieved by leveraging the standard S4 Consignment process. The consignment process provides visibility, logistics support, and tracking of assets that leave your company premises but are still owned by the company. When demand comes for a demo product, we should prioritize delivery from the dedicated capitalized inventory pool. Standard programs may need to be enhanced to determine the demo storage location at the time of order entry to perform ATP.

Send free stock to customers for demonstration purposes.

As mentioned earlier due to the supply and demand balance we may have to send a free stock which was originally intended for sale for customer demo purposes. In this case, the product needs to be created as a capitalized asset at the time of delivery to the customer. This could be achieved by using a standard consignment process; however, the asset creation would be an enhancement to standard functionality at the time of the post-good issue.

Based on order type, order reason, plant, storage location, and movement type in a BRF+ table could help determine when a particular logistics scenario would trigger asset creation and capitalization.