SAP Enterprise Structure – A Case Study (part 6): Enterprise Structure concept in Logistics




This is the part 6 of the series of articles about SAP Enterprise Structure – A Case Study. Read part 1 here.

Enterprise Structure concept in Logistics

Plant

A plant is the place of production, or branch of a company, or simply a collection of several locations of material stocks in close physical proximity.

A plant is represented by a client-unique 4-digit alpha-numeric.

A plant is assigned to one company code.

One company code can have more than one plant.

SAP recommends that to get complete functionality of the SAP ERP system, the country of plant is the same with the country of the company code. We should create a company code for each country where the plant is located.

Plant is used in Material Management (MM), Production Planning (PP), Sales and Distribution (SD), and Plant Maintenance (PM) module.

Division

Division is a way to group materials or services. A wide range of materials or services can be divided into divisions.

Division is a field in the material master data (it can be input/edited on “Basic Data 1” view by MM01/MM02 t-code). That’s why a certain material can be assigned to one division only. Usually, for sales material, we set the division field as a mandatory field in the material master data. A certain material can also not be assigned to any division, for example a non-sales material that we don’t need to categorized into a specific division.
In Sales and Distribution module, division combined with other organization units (sales organization and distribution channel) will define the sales area. We can have sales area specific master data, such as material, customer, and pricing master data.
Division is used in determining business area from logistics transaction in MM and SD module. We will explain this on Assign Business Area to Plant/Valuation Area and Division section.

Valuation Level

Valuation level is the organizational level at which material is valuated. The value of valuated materials in SAP ERP is recorded in company code’s General Ledger account, usually under the inventory account.

In a client, there are two possible organizational level at which material is valuated:

  1. Plant.
    When stock is valuated at plant level, we can valuate a certain material in different plants at different prices. Valuation must be at this level in the following cases:

    • If we want to use the application component Production Planning (PP) or Costing
    • If our system is a SAP Retail system
  2. Company Code.
    When stock is valuated at company code level, the valuation price of a certain material is the same in all of a company’s plants (that is, in a company code).

SAP recommends that we set material valuation at Plant level. Defining the valuation level in Configuring is a fundamental setting, and is very difficult to reverse.

 

The valuation level will determine how the value of a material is maintained in the material master data (in the accounting data). The value of a material will be maintained for each plant (in the case of the valuation level is plant, which means that each plant is a valuation area) or for each company code (in the case of valuation level is company code, which means that each company code is a valuation area).
If valuation level is the company code level, all plant inventory materials are managed in a joint stock GL account for each company code. If valuation level is the plant, the inventory material for each plant can be managed in different GL accounts.

In the next article, I will explain how to Define Plant in SAP configuration.

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One thought on “SAP Enterprise Structure – A Case Study (part 6): Enterprise Structure concept in Logistics

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