- 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.
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.
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