SAP Enterprise Structure




SAP enterprise structure is organizational structure that represents an enterprise in SAP R/3 system. It consists of some organizational units which, for legal reasons or for other specific business-related reasons or purposes, are grouped together. Organizational units include legal company entities, sales offices, profit centers, etc. Organizational units handle specific business functions.Organizational units may be assigned to a single module (such as a sales organization assigned to Sales and Distribution (SD) module, or to several modules (such as a plant assigned to Materials Management (MM) and Production Planning (PP) module).SAP R/3 system can represent a complex enterprise structure. Its flexibility can integrate the structure of an enterprise by linking its organizational unit. Enterprise structure design is a fundamental process in a SAP implementation project. The design is mainly determined by the business scenarios performed in an enterprise. Once the design is determined, it will affect many things such as how to perform a transaction and generate reports on SAP system. Although it’s possible, it requires great effort to change the enterprise structure. So , we must ensure that the enterprise structure designed in the SAP implementation project can accommodate all business scenarios and enterprise’s requirements for current and future situation.

From MM and FICO view, the typical enterprise structure can be seen as following image.

  • A Client is the highest-level element of all organizational units in SAP R/3 system. The client can be an enterprise group with several subsidiaries. An SAP client has its own master data (Data which is used long-term in the R/3 System for several business processes such as customers, materials, and vendors master data). In SAP, a client is represented by a unique 3-digit number.
  • A Company Code is a unit included in the balance sheet of a legally-independent enterprise. Balance sheets and Profit and Loss statements, required by law, are created at company code level. The Company Code is the smallest organizational unit for which we can have an independent accounting department within external accounting, for example, a company within a corporate group (client). In SAP, a company code is represented by a unique 4-digit alpha-numeric for a specific client. It is the central organizational element of Financial Accounting. At least there is one company code in a client. We can set up several company codes in one client in order to manage various separate legal entities simultaneously, each with their own balanced set of financial books. Besides company code, in FICO module there is also another important organizational unit which is Controlling Area. The Controlling Area is the business unit where Cost Accounting is carried out. Usually there is a 1:1 relationship between the controlling area and the company code. For the purpose of company-wide cost accounting, one controlling area can handle cost accounting for several company codes in one enterprise.
  • A plant is the place of production or simply a collection of several locations of material stocks in close physical proximity. A plant is represented by a unique 4-digit alpha-numeric for a specific client. Plant is used in Material Management (MM), Production Planning (PP), and Plant Maintenance (PM) module. A plant is assigned to one company code.
  • A Storage Location is a storage area comprising warehouses in close proximity. A Storage Location is represented by a unique 4-digit alpha-numeric for a specific plant. Material stocks can be differentiated within one plant according to storage location (inventory management). Storage locations are always created for a plant.
From MM perspective there another important organizational unit: Purchasing Organization.
It’s an organization unit that has responsibility to company’s purchasing requirements. It negotiates purchasing conditions (price, discount, and other things) with vendors. A Purchasing Organization is represented by a client-unique 4-digit alpha-numeric.

A company can have one or more purchasing organizations.

If a company centralizes its purchasing activities, it only needs one purchasing organization. It means that it only has one purchasing condition for a material with a vendor at a certain time.

If a company decentralizes its purchasing activities, it will need more than one purchasing organizations. It means that it can have more than one purchasing conditions for a material with a vendor at a certain time. For example, after negotiating with a vendor, a head quarter purchasing organization buys a material with 100 USD price. That company has a branch at other state/region that is assigned to other purchasing organization. The branch can purchase the same material to the same vendor, for some reasons, with different price e.g. 105 USD.

Facts about Purchasing Organization

A purchasing organization must be assigned to one or more plants.

A purchasing organization can be assigned to one company code.

A purchasing organization can also exist without being assigned to a company code. Since each plant must be assigned to a company code, the company code can be determined via the plant.

One plant can have one or more Purchasing Organizations.

Each purchasing organization has its own info records and conditions for pricing.

Each purchasing organization has its own vendor master data.

Each purchasing organization evaluates its own vendors using MM Vendor Evaluation.

Possible organizational forms of Purchasing Organization in a SAP client:

  • Corporate-group-wide purchasing
    A purchasing organization is responsible for the purchasing activities of different company codes.
    In this case, we do not assign a company code to the purchasing organization. We assign plants from different company codes to the purchasing organization.
  • Company-specific purchasing:
    A purchasing organization is responsible for the purchasing activities of just one company code.
    In this case, we assign a company code to the purchasing organization. The purchasing organization may procure only for this company code. we assign only plants of the company code concerned to the purchasing organization.
  • Plant-specific purchasing:
    A purchasing organization is responsible for the purchasing activities of one plant.
    In this case, we assign the plant and the company code of the plant to the purchasing organization. The purchasing organization may procure for this plant only.

SAP Study Materials Series e-Book
To get more details on SAP Enterprise Structure, you can buy my e-book (50 pages .pdf file) at SAP Study Materials Store.

The e-book explains in details about the SAP Enterprise Structure (MM and related modules such as FI, Logistics, and SD) Concept and Configuration Guide. Just like other articles on my SAP Study Materials blog, I wrote the e-book in a simple-to-understand way, so you can learn it easily. You don’t need to have extensive SAP knowledge and experience to be able to configure the SAP Enterprise Structure, as the e-book start explaining each step with the basic concept behind it. After understanding the concept, the e-book will show the step-by-step configuration with the screen shots.


16 thoughts on “SAP Enterprise Structure

  1. Really its helpful for the starters to understand the concept.

    do you have any idea where i can find a training and access to SAP MM

    Thanks
    Safeeq

  2. Very good information! A question: is not that possible to create P&L;, Balance Sheet and Cash Flow statements utilizing Business Area x Plant combo and, thus limiting the number of company codes to use?

  3. @Toly: Company codes must be created if it's required by law to provide Financial Reports to external parties, such as Market exchange, Tax Office, etc.

  4. Hi Rizki,
    All thanks for this great knowledge you have shared on SAP. I am an auditor and please help me out on this-
    Is it possible to view ( through some t-code or something) the entire organization structure in SAP… i.e will it be possible for me to view how the entire organization has been structured in SAP ( company, controlling areas, plants, profit centers, cost centers) and how they are linked to each other?
    I am working with a audit firm and regularly face this problem when i go on audits… plz help… plz reply to kamlesh.dash@axisindia.co.in

    Thanks in advance for ur help

  5. Hi Kamlesh,

    You can see the configuration with "SPRO" t-code and go to "SAP Implementation Guide (IMG) – Enterprise Structure" menu.

    You can see the definition and assignment of enterprise organizational unit there.

    Regards,
    Rizki

  6. Pingback: Procurement Cycle - Purchase Order Processing | iERP.us - Integrated ERP Software Solution Guide: SAP ERP

  7. The the next occasion I read a blog, Hopefully it doesnt disappoint me around this blog. What i’m saying is, I know it was my substitute for read, but I really thought youd have something interesting to express. All I hear is often a number of whining about something you could fix in the event you werent too busy in search of attention.

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