MM1001 MM Organization Structure - v1.

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The Organization

Goals &
Strategy

Environment
Size
Structure
• Formalization
• Specialization
• Hierarchy of authority
Culture • Centralization Technology
• Professionalism
• Personnel Ratios

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Name of the Functionality
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe

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Name of the Functionality
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe

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Course Objective
• Become familiar with SAP Organization Levels in
• Procurement Process.
• Definition Of Organizational units in SAP - Organization,
• Client, Company code, Plant, Purchasing Organization,
• Storage location, Purchasing Group.
• Assignment Of Organizational units in SAP.
• Creation & Assignment Of Organizational units in SAP.
• Case Study & Exercise.
• Tips & Tricks
• Test Your Knowledge

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Organization…?
• An organization is a social arrangement which pursues collective goals,
which controls its own performance, and which has a boundary
separating it from its environment.

• The word itself is derived from the Greek word organon meaning tool.

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Purpose
FINANCE PURCHASE INVENTORY

Organization Structure

PLANNING & SALES &

PRODUCTION DISTRIBUTION

• An organizational structure depicts the structure of an organization in terms of relationships

among personnel or departments.
• An organizational chart also represents lines of authority and responsibility.
• An organizational chart indicates the formal structure of a business or company.

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Use
• Organization is a Group of people with specific
responsibilities acting together for achieving specific
purpose determined by the organization.

• Any organization needs proper co-ordination within all

its departments.

• Link between departments is maintained in form of a

hierarchy.

• Organizational Structure facilitates proper flow of

information, division of responsibilities & effective
reporting.

A logical hierarchy is called as an Organisational Structure.

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Challenges
• Large business houses need specialized work force to focus on
specific areas
• of business. Different units within an Organization operate in
different environments and hence develop their own specialized
knowledge base, procedures, tools & techniques and policies.
• It is a challenge to create a hierarchical structure that will cater
to the needs of individual units yet integrate the effort to meet
the common objectives of the Organization as a whole.
• In any business it becomes increasingly difficult to ensure
proper coordination, proper exchange of information, ability to
react quickly and collate information required to form a big
picture if the organization structure is too complex or too
layered.
• A balanced and simple structure can optimize this need for
autonomy for various units and coordinate the efforts
effectively.

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Name of the Functionality
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe

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SAP Organization Unit

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Enterprise Structure

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 SAP Organizational Levels in Procurement Process

•In the SAP system, organizational levels are structures that represent the legal or organizational views
of a company.
•The determination of the organizational levels is an important work step in the project. In fact, it is an
essential prerequisite for all subsequent activities.
•The organizational levels are defined and assigned in Customizing
for the enterprise structure.

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SAP - Organization Unit
Client
• The client is a unit within an SAP system that is self-
contained both in legal and organizational terms and in
terms of data, with separate master records and an
independent set of tables.
• From a business viewpoint, the client represents a
corporate group, for example.
• It is the highest hierarchical level of Organizational unit,
with its own data, master records and set of tables.
• A client is uniquely defined in the system by a three-digit
numeric key.
• Examples for Client specific data:
Application data: Business transaction data and Material Master data.
User Master data: Authorization and User Groups . 13 www.3ritechnologies.com
SAP - Organization Unit
Company Code
• The company code is the smallest organizational unit of external accounting
for which a complete, self-contained bookkeeping system can be replicated.
• This includes the entry of all events that require posting to the accounts and
the creation of a complete audit trail for balance sheets and profit and loss
statements. A company code represents an independent unit producing its
own balance sheet, for example, a company within a corporate group
(client).Therefore, a company code is the minimum structure necessary in R/3
FI.
• In an international business, operations are often scattered across numerous
countries. Since most government & tax authorities require the registration of
a legal entity for every company, a separate Company code is usually
established per country.
• A company code is defined in the system by means of a four-character
• alphanumeric key that is unique in the client.

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SAP - Organization Unit
Purchasing Organization
• The purchasing organization is an organizational unit within logistics that
• subdivides the enterprise according to the purchasing requirements.
• A purchasing organization procures materials or services, negotiates conditions of purchase
with vendors, and assumes responsibility for these transactions.
• It is an organization unit which is responsible for all types of Purchase, right from
• creation of RFQ to Purchase Order.
• Purchase org can play a role of Centralized purchasing or Company Specific purchasing or
Plant specific purchasing.
• It has its own info records, conditions for pricing and Vendor Master and negotiates
conditions for purchase (price) with Vendors and with other plants.
• Purchase Organization serves as selection criterion for list of all purchasing documents
• and it is the highest level of aggregation (after client) for Purchasing statistics.
• Authorization to process various Purchase transaction can be controlled through
• Purchase Organization
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SAP - Organization Unit
Purchase Group
• Purchasing Group is a key for a buyer or group of buyers responsible for certain
• Purchasing activities.
• The Purchasing group is:
• Internally responsible for the procurement of a material or a

• class of materials.
• The principal channel for a company’s dealings with its Vendors

• Purchasing Group is mainly used for reporting purpose. It can be also used for
• controlling the approval (release strategy) of various Purchasing documents.
• Purchasing group can also control the authorization for processing various
• purchasing transactions.

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SAP - Organization Unit
Plant
• Plant is an organizational logistics unit where certain important business
functions like Production, Procurement, Inventory, Inbound & Outbound delivery
processing, Plant Maintenance & Materials Planning are carried.
• Plant plays an important role in following areas
• Materials can be valuated at Plant Level.
• A Factory Calendar is controlled at Plant Level
• Certain views like MRP, Purchasing… in the Material Master are maintained at
• Plant Level.
• User level authorization can be controlled at Plant Level.
• A plant is defined in the system by means of a four-character alphanumeric key
• that is unique in the client.
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SAP - Organization Unit
Storage Location
• The Storage Location is an organizational unit that allows the differentiation of
material stocks within a plant.
• Storage Locations are only used for informative assignment. It can be used as a
parameter criteria in reporting.
• Inventory is reported at storage location level. Thus at least one storage location
is necessary for Inventory Management & delivery processing.
• However valuation can be only at plan (or higher) level.
• Storage Location has the following attributes
• Physical Inventory is carried out at Storage Location level
• Plant can have one or more Storage Locations
• A storage location is defined by means of a four-character alphanumeric key
that is unique in the plant.
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Assignment of Org Units

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Assignment of Organizational units
• In SAP R/3 you represent Organizational Structure as legal and logical
representing the hierarchy of your company by assigning the
organizational units which represent individual departments
• This assignment forms the base for all Purchase activities in SAP, with
out which no transaction can be executed
• Also, it is generally necessary to interact with other organizational units
such as Plants or Storage Location

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Purchasing Organization
Centralized Purchasing
The concept of Centralized
Plant: 4
Purchasing is used when
procurement is done centrally for
all the plants irrespective of there
Plant: 3 locations.
Central Purchasing helps to have
a better bargaining power.
Central Purchase org: C001 The Central Purchase org. is
assigned to all the Plants and
need not be assigned to there
Purchase
Organization respective Company codes.
The Plants assigned to Central
Purchase Org. may or may not be
assigned to another Purchasing
Org.
Plant: 1

Plant: 2

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Purchasing Organization
Plant-specific Purchasing

In Plant specific Purchasing, the

Purchase Purchase Purchase Org assigned to Plant is
Organization Organization only responsible for procurement of
respective Plant.
This concept is normally used to
Purch Org: P001 Purch Org: P002 procure goods and services which
are not economically viable to
procure centrally.
Such Purchase org. is only assigned
to the Plants and are not assigned to
there respective Company codes.
The Plants assigned to such
Purchase Org., may or may not be
assigned to another Purchasing
Org.

Plant 1000 Plant 2000

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Purchasing Organization
Company-specific Purchasing
In Company specific Purchasing,
the Purchase Org assigned to
Purchase Purchase
Organization Organization
Company is responsible for
procurement of all the plants
assigned to that respective
Purch Org: P001 Purch Org: P002 company code.
This concept is normally used to
procure goods and services which
are not economically viable to
procure centrally.
Company Code: 1000 Company Code: 2000 Such Purchase org. is assigned to
the all the Plant and also to the
respective Company codes.
Balance Balance The Plants assigned to such
Sheet Sheet Purchase Org., may or may not be
assigned to another Purchasing
Org.

Plant 1001 Plant 1002 Plant 2001 Plant 2002

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Purchasing Organization
Reference Purchase Organization
Vendor Master Contract
Vendor: ABC
P Org: R001 Vendor: ABC
P Org: R001
Reference Material: 1000
P Org: R001 Qty: 10000
Purch. Info
Material: 1000
Vendor: ABC
P Org: R001
Purchase Order

Vendor: ABC
Purchase P Org: P001
Organization Material: 1000

Purch Org: P001

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Purchasing Organization
Reference Purchase Organization
• Reference Purchase Organization is like a Central purchase Organization
whose conditions or contracts, other purchase organization (linked to it)
can use to procure materials & services.

• Reference Purchase Organization gives a better bargaining power to other

Purchase organization (linked to it) as it is in a better position to negotiate a
comprehensive Contract with favorable conditions.

• It also saves time and effort in maintaining master data. The Vendor master
and Purchase Info Record created with Ref. Purch Org. can be used by other
Purchase Org. linked to it.
• A Ref Purch org need not be assigned to any Company Code or Plant.
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Purchasing Organization
Standard Purchase Organization
Standard Purch Org
Purch Org
P001 P Org: P003 P002

Plant: 1

Standard Purch org is used in Pipeline procurement, consignment and Stock transfer process.
This helps when a single plant is assigned to many purchase organization. In such scenario one
of the Pruch org can be defined as Standard Purch Org.
In case of Consignment and Stock transfer process, system does the source
determination automatically with the help of Standard Purchase Org.
In case of Pipeline procurement Info record created for Standard Pruch org is used for issue of
Material.
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Purchase Organization Assignment Overview

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Assignment of Organizational units in
Inventory Management

• The enterprise structure is created through the assignment of organizational

levels to each other.
• A client may therefore contain several company codes. In turn, a company
code may contain several plants.
• A plant can only ever belong to one company code however.
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Organization for Inventory Management
• Plants are assigned to the Company Code. More than one Plant can be
assigned to one Company Code. A Plant cannot be assigned to multiple
company codes.
• Storage Locations are assigned to Plant. Multiple storage location can be
assigned to plant.
• It is always recommended to create a new company code, Plant and
storage location by copying it with reference to standard organization unit.
• Since the key of a plant is unique in a client, and a plant can only belong to
one company code, by specifying the plant, you simultaneously specify the
company code.

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Name of the Functionality
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe

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Agenda

Defining of Org Unit

Assignment of Org Unit

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Define – Company Code
It is a 2 step procedure to create a Company Code

STEP 1

SPRO  Enterprise Structure  Definition  Financial Accounting  Edit, Copy,

Delete, Check Company Code  Copy, delete, check company code
a b
Press the icon to create a new Company
code with reference to an existing Comp Code.
c
In the Tab “From”
enter the Comp code
which is used as
reference & in Tab “To”
enter the new Comp
code to be created

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Define – Company Code
STEP 2

SPRO  Enterprise Structure  Definition  Financial Accounting  Edit, Copy,

Delete, Check Company Code  Edit company code data
a b
Select the Comp Code created and press icon
or via Ctrl + Shift + F2 to view the Comp Code
details.
You can also view the details the menu path Goto
 Details
Comp Code can be created directly from this
option, but it is not recommended since there are
613 Tables that needs to be updated for the Comp
code to function. These tables are not updated
fully if the Comp Code is not created with
reference to an existing Comp Code.
Contd…..
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Define – Company Code
d
Press icon to access the address details Tab.
c

Press icon to view all the fields

of address screen.

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Define – Plant
It is a 2 step procedure to create a Plant

STEP 1

SPRO  Enterprise Structure  Definition  Logistics General  Define, copy, delete

check plant  Copy, delete, check plant
a b
Press the icon to create a new Plant with
Reference to an existing Plant.
c
In the Tab “From”
enter the Plant code
which is used as
reference & in Tab “To”
enter the new Plant
code to be created

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Define – Plant
STEP 2

SPRO  Enterprise Structure  Definition  Logistics General  Define, copy, delete

check plant  Define Plant
a
b
Select the Plant created and press icon
or via Ctrl + Shift + F2 to view the Plant
details.
You can also view the details the menu
path Goto  Details

Plant can be created directly from the option “Define Plant”, but it is not recommended,
since there are 251 Tables which needs to be updated for the Plant to function. These
Tables are not updated fully if the Plant is and not created with reference to an
existing Plant.

Contd…..
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Define – Plant
c d
Press icon to access the address details Tab.

Press icon to view all the fields

of address screen.

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Define – Storage Location
SPRO  Enterprise Structure  Definition  Materials Management  Maintain
Storage Location 2
1

Click
to create a new
Storage Location
3

You can maintain

multiple
Click to addresses to a
get the address same Storage
tab. location through
Sequential
Storage location
number

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Define – Purchasing Organization
SPRO  Enterprise Structure  Definition  Materials Management  Maintain
Purchase Organization

Press icon to create a new

Purchase Organization.
Press icon to create a new
Purch Organization with reference
to a existing Purchase organization.

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Define – Purchasing Group
SPRO  Materials Management  Purchasing  Create Purchasing
Groups

Press icon to create a new

Purchasing Group.
Press icon to create a new
Purch Group with reference to a
existing Purchase Group.

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Assignment – Plant to Company Code
SPRO  Enterprise Structure  Assignment  Logistics General  Assign Plant
to Company code

Select the Comp System display all the Unassigned Plant

code Codes.
and press tab Select the relevant Plant Code and save the
to a assign Plant transaction.

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Assignment – Purch org to Comp Code
SPRO  Enterprise Structure  Assignment  Materials Management  Assign
Purchasing Organization to Company code

Select the Comp code

and press tab
to a assign Purchasing
org

System display all the

Unassigned Purchase
Organization.
Select the relevant Purch Org
and save the transaction.

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Assignment – Purch org to Plant
SPRO  Enterprise Structure  Assignment  Materials Management  Assign
Purchasing Organization to Plant

Select the Purchasing

Org
and press tab
to a assign Plant.

System display all the Plant

Select the relevant Plant and
save the transaction.

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Assignment – Std Purch org - Plant
SPRO  Enterprise Structure  Assignment  Materials Management  Assign
Standard purchasing organization to plant

From the Purchase Organizations assigned to a

Plant, one Purchase org can be assigned as a
Standard Purchase Organization.
One Purchase Organization can be assigned to
Multiple Plants as a Standard Purchase Org.

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Assignment – Purchase org - Ref Purch org
SPRO  Enterprise Structure  Assignment  Materials Management  Assign
purch organization to reference purch organization

One Reference Purchase org can

be assigned to multiple Purchase
Org.

• Select “Release order” if you want to allow release orders against

Contract
set up by the Ref Purchase Org.
• Select “Conditions” if you want to use conditions maintained for the
Ref Purchase Org.

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Name of the Functionality
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe

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Let me Case Study

ABC Corporation has business setup in Germany and India with its head quarter based
in Frankfurt.
In Germany it has 2 manufacturing plants, one located in Darmstadt and the other in
Hamburg. Each manufacturing plant handles only 2 type of materials, stocked in
distinct locations. ABC Corporation also has one depot located in Darmstadt from
where it supplies material to its Whole sellers.
In India, ABC Corporation has 1 manufacturing plant located in Gujarat and 1 depot in
Mumbai. Manufacturing Plant handles only 2 type of materials, stocked in distinct
locations.
There is a Purchasing department located in head quarter who centrally procures
materials for all the plants located in Germany and India. There are also separate
purchasing department located in India & Germany who is responsible for plant
specific procurement.
The strength of the each purchasing department is 2 employee, who are responsible to
negotiate and deal with Vendors. You need to map the organization structure of ABC
Corporation in SAP
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Let me
• Create 2 Company Codes each for India and Germany
• Create 3 Plants codes (2 manufacturing unit and 1 Depot) and assign to
the company code created for Germany.
• Create 2 Plants codes (1 manufacturing unit and 1 Depot) and assign to
the company code created for India.
• Create 8 Storage Locations. 2 each for manufacturing plants and 1 each
for the Depots.
• Create Central Purchasing Org and assign to all the manufacturing plant
located in India and Germany.
• Create 2 Purchasing Org and assign each to respective plants located in
India and Germany.
• Create 6 Purchasing groups (2 for each Purchasing Org).
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Name of the Functionality
1 PrepareMe

2 TellMe

3 ShowMe

4 LetMe

5 HelpMe

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Tips and Tricks
• Transaction Code can be viewed in SPRO by using the following path
Display IMG(SPRO) Additional Information Additional
Information  Display Key IMG Activity.
• From the main menu select Additional information  Display key  Attributes.
The last 4 characters of attributes forms the Trans code.
• You can display the Total tables affected by company code in the company code
creation screen from main menu Extras  Associated Tables.
• You can also display the tables affected by Plant code in the plant code creation
screen from main menu Extras  Associated Tables.
• You can use the F1 field help (icon on screen or function key F1 on keyboard) to
display possible entries for this field.
• By pressing the F4 key, you get information on possible input values. Alternately, you
can click the pushbutton directly to the right of a selected field to invoke the input
help for that field.

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Additional Information
• The definition of organization units is a fundamental step in your project.
It is a critical factor in how the project will be structured. You should not
use more organization units than necessary. Once you have decided on
an organizational structure it is not easy to change it.

• In order to simplify master record and document entry, the

organizational units can be stored as user parameters in the user master
record. It is not necessary to specify the organizational units since the
values are proposed automatically.
The following are examples of IDs defined for user parameters:
• WRK – Plant
• EKO – Purchase Organization
• EKG – Purchase Group
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Test Your Knowledge
1. Which statements apply to a client in an SAP system?
Choose the correct answer(s).
□ A A client forms a completely independent business unit.
□ B A client has its own database.
□ C A client corresponds with a customer.
□ D A client can represent an entire company.
2. You can use the F1 key to ...
Choose the correct answer(s).
□ A Obtain an explanation of the meaning/significance of a field
□ B View a list of possible entries
□ C Change your user data (such as the logon language)
□ D Exit the current session
□ E Obtain technical details relating to a field52 www.3ritechnologies.com
Test Your Knowledge
3. You use the F4 key to ...
Choose the correct answer(s).
□ A Open a new session
□ B Obtain technical details relating to a program
□ C Call up the SAP Library
□ D Obtain a list of possible entries for an input field
□ E Generate a print request for the current screen
4. A plant can be assigned to several company codes.
Determine whether this statement is true or false.
□ True
□ False
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Test Your Knowledge
5. A purchasing organization can act for several plants.
Determine whether this statement is true or false.
□ True
□ False
6. A purchasing group must always be assigned to a purchasing organization.
Determine whether this statement is true or false.
□ True
□ False
7. A purchasing organization must always be assigned to a company code.
Determine whether this statement is true or false.
□ True
□ False
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Answers

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