Written and maintained by CASRAI Editorial Board
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General information for supply and procurement staff. It is not legal, regulatory or medical advice, and it describes no clinical procedure.
Short answer
Consignment medical supplies are products that a manufacturer or supplier stores at a hospital or clinic while the supplier still owns them. Ownership passes to the facility only when the products are used, and the supplier then invoices at a price agreed in advance. This is how GS1 Germany describes the model in its 2014 recommendation for the healthcare sector.
Definition and scope
GS1 Germany, working with hospitals, device and pharmaceutical suppliers and group purchasing organisations, defines the consignment process in its Recommendation for Consignment processes in the Healthcare Sector (July 2014). The supplier keeps its products in a warehouse of the hospital, and the products “remain the property of the supplier or manufacturer.” Ownership transfers when the hospital uses them, and that use results in an invoice from the supplier to the hospital. The price is negotiated and agreed before the invoice transaction, and settlement is by invoicing or self-billing.
The same arrangement appears under several names: medical supply consignment, medical device consignment, and consignment inventory for medical devices in a hospital. They describe one inventory strategy. The subject here is the stock arrangement, not the pricing mechanics, which are covered in the dictionary entry on consignment inventory pricing.
Who controls the stock and when ownership transfers
GS1 separates two models according to who controls stock in the warehouse. In Buyer Managed Inventory (BMI) the hospital decides replenishment quantities and dates from stock on hand and stock consumed. In Vendor Managed Inventory (VMI) the manufacturer or supplier manages replenishment from the removal reports it receives. For how consignment relates to VMI more generally, see the comparison consignment inventory vs vendor-managed inventory and the term vendor-managed inventory (VMI).
In both models the trigger is the same. The hospital reports what it used, and at that point the supplier transfers ownership and invoices from the usage reports. Until then the facility holds stock it does not own.
What both sides have to keep in step
GS1 lists the prerequisites that the parties should agree before consignment processing starts:
- standardised identifiers for products (GTINs) and for locations (GLNs);
- correct, synchronised master data between the parties;
- ERP systems, communications and hardware able to support the process;
- standard electronic messages (the recommendation uses EANCOM).
The recommendation also says both parties should maintain accurate, synchronised stock records in their own databases, exchange timely information about removals, and exchange regular inventory reports. The message codes in the document are German and EANCOM specific, so treat it as one published recommendation rather than a universal rule.
Consignment agreement checklist
GS1 recommends that a consignment contract record specific details because consignment is a particular type of inventory strategy. The items it says the contract may include are a ready checklist for supply staff reviewing an agreement:
| Topic to settle | What the GS1 list says |
|---|---|
| Storage | Storage location, coverage of the costs, delay in acceptance |
| Who runs the store | Warehouse operators (possibly third parties), with the obligations and rights of each party |
| Ownership | Transfer of ownership, and the period for the transition of the goods into the hospital’s inventory or property |
| Reporting and settlement | Frequency of the removal-of-goods message, or the settlement process |
| Stock levels | Minimum and maximum stocks |
| Risk | Liability for loss or theft, inspection of the goods, insurance |
| Term | Entry into force and termination |
The recommendation adds that because the hospital performs the day-to-day inventory handling while ownership stays with the supplier, a contractual agreement about inventory variances and their financial reconciliation is recommended. Counting is normally done by the hospital at the supplier’s request, although, depending on legal or regulatory requirements, the parties may agree that the manufacturer counts. Returning goods to the supplier is outside the scope of the GS1 document.
Traceability and UDI for consigned devices
Batch, lot and serial numbers matter in consignment because GS1 says they are carried in the usage messages so that stock can be reconciled accurately. A second reason is regulatory. In the United States, 21 CFR 801.30(a)(1) excepts a finished device manufactured and labeled before its UDI compliance date from the UDI labeling requirement, and that exception expires three years after the compliance date for the device. The regulation text does not mention consignment.
FDA did address consignment in a March 22, 2016 response letter to AdvaMed on the UDI rule. It stated that devices labeled and consigned or loaned to hospitals or other health care facilities as of their compliance date would be required to carry UDI labeling no later than three years after that date, under the 801.30(a)(1) exception. The letter records the concern that some consigned or loaned devices have a shelf or use life longer than three years, and says FDA understands that having labelers locate, remove, store or rework such devices would be burdensome. The discussion is about devices such as orthopedic trays, not consumables. A facility handling consigned devices should confirm current requirements with the supplier and with FDA’s UDI pages.
Where it matters for labs and clinics
The checklist above is the practical use of the topic. Consignment moves stock ownership, counting duties and loss liability onto a document, so staff who store supplier-owned products are working to an agreement and not only to the facility’s own stock policy. Broader stock practice is covered in the guides on inventory management in healthcare and the hospital supply chain.
Common misunderstandings
- “Consigned stock is free.” The goods are not paid for on delivery, but GS1 states that use results in an invoice at a price agreed beforehand.
- “The supplier manages everything.” Only in the VMI model. In BMI the hospital controls replenishment, and in both models the hospital performs the operational inventory handling.
- “Once it is on our shelf, it is ours.” In the GS1 description ownership stays with the supplier until the hospital uses the product and reports it.
- “Records can sit with one party.” GS1 recommends both parties keep accurate, synchronised stock records.
FAQ
What is consignment?
Consignment is an arrangement in which a supplier places its goods with another party while keeping ownership until the goods are used or sold. In healthcare, GS1 describes the manufacturer storing products in the hospital’s warehouse, with ownership moving to the hospital on use.
What is consignment inventory for medical devices in a hospital?
It is device stock held at the hospital but owned by the manufacturer or supplier until the hospital reports its use. Because lot and serial numbers travel with the usage reports, the facility and supplier can reconcile exactly which items were used. FDA has also addressed UDI labeling of devices consigned or loaned to hospitals.
Is medical device consignment the same as medical supply consignment?
The ownership mechanism is the same. What differs is the regulatory layer: devices carry UDI and labeling obligations that the facility’s agreement should account for.
Sources
- GS1 Germany, Recommendation for Consignment processes in the Healthcare Sector, July 2014: publikationen.gs1-germany.de (checked 2026-11-01).
- U.S. FDA (CDRH), response letter to AdvaMed on the UDI rule, March 22, 2016, as hosted by AdvaMed: advamed.org (checked 2026-11-01).
- 21 CFR 801.30, General exceptions from the requirement for the label of a device to bear a unique device identifier: law.cornell.edu (checked 2026-11-01).
