Organization Structure/Enterprise Structure in SAP MM
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Organization structure explains their structure/Hierarchy of the company they follow to run there business on daily basis, Every company will follow the same structure up to some level but every company which are in SAP family then they have 90% same structure and 10% may differ as per there rules/regulations/standards.
Organization structure contains may levels, where each level is having their own tasks/rules and no one can by-pass the hierarchy, because SAP is having those features where we cannot process further even, we miss one small hierarchy (Assignment).
Every level in the organization structure are inter linked with one other having relationship like Example below.
A=B=C=D (Just overview) as same as (D=B=A=C) (Just overview)
Let’s think A company is having ERP tool (Non-SAP) and thinks that production and sales activities are not as per the standards and profit centers are not calculating properly which may leading to losses in sales and business.
Now company would like to move to ERP-SAP, in which all the things should be correct to maintain the proper daily activities and even higher management no needs to ask anyone for reports or goods inventory or sales management details from the departments.
Higher management can see the reports/stocks/profit centers/sales in the SAP directly, with no support from anyone, and even employees and customers need to follow the process for sales as well as production from the organization. There is no such deviation in the company to flow the profits outside, so many companies are moving to SAP to increase the standards of there company even SAP is cost effective.
Now SAP consultants will come into picture, where SAP provides the standard settings to their customers once you buy the ERP-SAP to your company, now consultants in the company sit with higher management for the discussion for the flow and the process.
MM/FI/SD/PP will be supporting for functional process of SAP, ABAP/Basis will be supporting for technical and even we have many but company follows other modules as per there requirements, whereas mentioned modules are very important for them to design and make settings properly as per there company conditions.
SPRO- It’s the T-code for backend settings.
SAP reference IMG will take you to the path of the settings.
As we spoke above enterprise structure contains many levels and each level will be having their own roles and responsibilities, they may maintain all these levels as per there business requirements or legal reasons.
2. Company Code
4. Storage Location
5. Purchase Organization (Will speak in depth below)
6. Purchase group
1. Client/Company (FI Consultant will define this)
A client is the highest level in the organization and its independent with having their own master data and can pull reports of all company codes under that client.
Whatever Master data maintained in the client level is valid for all the levels in the organization structure. Under one client we can have N number of company codes as per there requirements.
2. Company Code (FI Consultant will define this)
Company code is maintained under the client, where company code is an independent accounting unit in the entire organization structure, where all the profit, loss and balance sheet accounts has been maintained by the company code.
Eg: let’s think for 1 country = 1 company code
If the client would like to know the profit loss accounts for one country Eg: India, then they can pull reports within few minutes you can have the exact data of profit loss balance sheets.
3. Plant (MM Consultant will define this)
A plant is an organization unit within the company code, where all the production activities and make finished goods available in the plant for the sales purpose.
All the logistics will be taken place in the plant and even warehouse activities will take place. Every material valuation will take place at plant level only.
4. Storage location
Storage location is the place where stock gets separated, where we have many types of stocks in plant and we need to separate the stocks as per there nature, like raw materials, packaging, semi-finished goods.
Each material types will take place one storage location and we can maintain N number of storage locations in one plant, and main thing is we can stock the physical stock. Material data can be maintained at storage location level and as well plant level also.
5. Purchase Organization:
Purchase organization is the part of hierarchy, where they will be responsible for purchasing activities in the respective plants or Company.
Here we can assign 1 purchase organization to 1 company code and needs to assign to all the plants, so that that purchase organization will be responsible for all the plants in that company code.
Or else, we can assign the purchase organization to plant and every plant will be having their respective purchase organization, so that every plant is independent with their own purchase organization
****Purchase organization is responsible for all the purchasing activities in the respective plant, if we assign as decentralized-plants wise****
Even we can do like, 1 company will have 1 purchase organization, where it’s called centralized purchasing.
1. Centralized purchasing
2. Company specific
3. Plant specific- decentralized
lets think we have a company IIIM- where its having centers in all the countries like US, UK ,Germany(plants) and some countries, now we have company codes, plants and respective storage locations, as we have all these we need the production to be taken place on daily basis and so we need purchase organization to fulfill this activity, for example we need today some engines and required immediately for production purpose and 1) If we have centralized purchasing then headquarters in US company-Purchase department will take up the decision to buy that engine and 2) if we select company specific then let think each country will have 1 company code and respective department will take up the decision and last one 3) plant specific- lying in your plant and will provide approvals for purchase.
Cross purchase organization (1 Scenario):
As I told in above scenario, each company code will be having their own purchasing organization (Company specific), in this case if suppose you want 1 purchase organization to be responsible to 2 company codes.
Its not possible to link 1 purchase organization to 2 company codes but we have something like cross purchase organization, its possible in plant level, where we can link purchase organization to plant with 2 different company codes.
Reference purchase organization:
Reference purchase organization will come into picture only if your company is using centralized purchasing.
We can create a one referenced purchase organization, and we can link to company specific purchase organizations, such that we can use this purchase organization when you will create contract with different plants with different purchase organizations.
Reference P.Organization-----Contract---different P.Organizations-Different plants
Example: let’s think we are managing a company where we have 5 plants with different locations and every time we use to purchase individually let think monitors we will buy for 10000 and each plant individually buys for around 9900-10000 as per the purchasing organizations and markets in the state. Now lets think reference purchasing organization will come –we have contract with reference purchase organization where will create only 1 contract with 1 big vendor and maintain all the plants in the contract that which are belonging to different purchase organizations, will order in bulk for all the plants whenever its required, so that will get for less price. so that we can procure that monitors for only 9500-9900(Quantity scaling will come into picture if we buy more monitors).
Better negotiations will be possible with reference purchase organizations.
****Behalf of other purchase organizations referenced purchase organizations will come into picture for all activities for better production/pricing.
6. Purchasing group
Purchasing group is an independent entity, where it explains the responsible buyer/ responsible group of buyers for those materials.
We can manage this in MM01, there was no assignment for the purchase group and MM persons will define this purchase group.
Backend settings-Definition and Assignment
SPRO-Enterprise Structure-Definition-Define Company-New entries and maintain the client
Mention all the details in client like address and other things and save.
SPRO-Enterprise Structure-Definition-Edit, Copy, Delete, Check company code-New entries.
Mention all the details and save.
SPRO-Enterprise Structure-Definition-Logistics general-define plant
Maintain all the plant details as shown in their screen.
Always take copy org from 1000 plant, which is predefined by SAP.
SPRO-Enterprise Structure-Definition-materials management-define storage location
We are maintaining plant while creating storage location and no need of other linking.
SPRO-Enterprise Structure-Definition-materials management-Define purchase organization
Assignment of all above Hierarchy:
Plant to Company code:
SPRO-Enterprise Structure-Assignment-Logistics General-Assign plant to company code
Purchase organization to company code:
SPRO-Enterprise Structure-Assignment-materials management-Assign Purchase organization to company code
Purchase organization to plant:
SPRO-Enterprise Structure-Assignment-materials management-Assign Purchase organization to plant code
Standard Purchase organization to plant
SPRO-Enterprise Structure-Assignment-materials management-Assign standard Purchase organization to plant code
Note: Next Blog will be Account Determination.