SAP MM - Organization Structure

Definition

Organization levels are structures that represent the legal or organizational views of a company in the SAP System.
Defining organizational levels is an essential step in your project and is vital for all subsequent activities.
Analyze the organizational structures and the process structures in your company and match them with SAP structures.
Once you have decided on an organizational structure, it is very difficult to change it.

Following are the typical Organizational Units mapped in SAP

Client
Company Code
Plant
Purchasing Organization
Purchasing Group
Storage Location

Client

The Client is a Commercial, Organizational unit within the SAP system, with its own data, master records, and a set of tables.
From a business perspective, the Client forms a Corporate Group.

Examples of Client-specific data includes

User Master data- such as parameters, authorization, and user groups
Customizing data such as organizational units, assignments, and document types
Application data- such as business transaction data and material master data

Company Code

The Company Code is the smallest Organizational unit for which you can have an independent accounting department within external accounting.
A company Code represents an independent accounting unit, for example, a Company within a Corporate Group (Client).

Company Code – Purpose

Balance sheets and Profit and Loss statements, required by law, are created at company code level.
In one client several company codes can be maintained in order to manage various business activities simultaneously, each with their own chart of accounts and balance sheet.

Plant

A Plant is an Organizational logistics unit that structures the enterprise from the perspective of Production, Procurement, Plant Maintenance, and material Planning.
A Plant is a manufacturing facility or Branch within a Company.

Plant – Examples

A plant can be one of the following types of locations:

Central delivery warehouse
Regional sales Office
Manufacturing facility
Corporate Headquarters
Maintenance plant

Plant - Considerations

The plant plays an important role in the following areas:

Material valuation

If the valuation level is the plant,

Material stocks are valuated at the plant level.
Material prices are defined for each plant.
Each plant can have its own account determination.
Inventory management
The material stocks are managed within a plant.

MRP

If Material Requirements are planned for each plant -

Each plant has its own MRP data.
Analyses for materials planning can be made across plants.

Costing

In costing, valuation prices are defined only within a plant.

Excise Registration Requirements

If an organizational entity is registered separately for excise requirements, then that entity needs to be defined as a separate plant in SAP.

Inventory Valuation

If inventory needs to be valuated at different rates in two different organizational entities, then these must be defined as separate plants in SAP.

Profitability analysis through CO-PA

Profitability analysis is carried out at ‘Plant’ level in SAP. In case a profitability analysis needs to be carried out for an organizational entity, it can be handled in either of the following ways:

Defining each of these entities as individual plants in SAP

Carrying out profitability analysis at product/product group level (belonging to the entity under reference) and assigning separate material numbers to same product if manufactured at two different entities.

Profit center Accounting

Where separate profit center accounting is required, at least one Plant needs to be created for each Profit center

Reporting Requirements

Reporting needs of existing organizational units can be fulfilled even if these units are not defined as separate plants in SAP

Transaction volume

In the case of any material movement between two plants, a SAP transaction document needs to be created. If the number of plants defined in the SAP system increase, the volume of transaction documents would also increase which may not be desirable. While configuring the organization structure of an enterprise in SAP, the objective would be, to define the least possible number of ‘Plants’ to restrict transaction volumes to a minimum

Plant Maintenance requirements

In order to carry out plant maintenance in SAP, the PM module does not require individual plants to be defined as it follows ‘Plants’ as defined in SAP logistics
If a plant performs plant maintenance planning tasks, it is defined as a maintenance planning plant.
A maintenance planning plant can also be responsible for carrying out maintenance activities in other plants also.

Manufacturing facility

Maybe a Physical Site with Multiple Manufacturing/ Production Lines
Maybe Multiple Manufacturing/Production Lines at One Physical Site

Storage Location

The Storage Location is an organizational unit that allows the differentiation of material stocks within a Plant.
Inventory Management on a quantity basis is carried out at storage location level in the Plant.
Physical Inventory is carried out at storage location level.

A storage location has the following attributes:

Physical inventory is carried out at the storage location level
There may be one or more storage locations within a plan
A storage location has a description and at least one address
It is possible to store material data specific to a storage location
Stock are managed on a quantity basis only and not on a value basis at storage location level
Storage Locations are always created for a plant

Purchasing Organization

A Purchasing Organization is an organization level that negotiates conditions of purchase with vendors for one or more plants. It is legally responsible for completing purchasing contracts.

The purchasing organization is responsible for the company's purchasing requirements.
Purchasing Organization can either be at company code level or Plant level.
This means that you can determine whether purchasing is organized centrally or de-centrally in your company. You can have a combination of both.

Purchasing group

The purchasing organization is further subdivided into purchasing groups (buyer groups), which are responsible for day-to-day buying activities.
Often used to identify individual buyers
Used for reporting

Introduction Master Data