Enterprise Structure in Materials Management:

The Organizational Structure in MM is made up of following

Organizational Levels:
Client
Company Code
Plant
Storage Location
Purchasing Organization
Purchasing Group

Client:
Represents a grouping or combination of legal, organizational,
business and/or administrative units with a common purpose.

Company Code: Company Code represents an independent accounting unit within a client.
Each company code has its own balance sheet and its own profit and loss statement.

Company code is the legal entity that is registered with the government that is responsible
for providing the Balance sheets, Profit and Loss statement that are required by law.
Overall the company code is responsible for taking care of the statutory requirements of
the law. An organization ( Company ) could have multiple company codes. And a
company code can be divided into multiple business areas which can be used for internal
reporting. The menu path to configure the company code is

[SPRO -> IMG -> Enterprise Structure -> Definition -> Financial Accounting ->
Edit,Copy, Delete, Check company code ]
All finance related ( company ) enterprise structure related elements are configured under
the Financial Accounting section.
All finance related ( company ) enterprise structure related elements are configured under
the Financial Accounting section.

Plant:
Operational unit within a company code. This organizational unit can represent the
actually factory or a virtual address or a physical address where goods can be stored or a
warehouse or a production facility or none of the above. There are a couple of things to
remember though

MRP is planned for each Plant

Material valuation can happen at the Plant level or the Company code level only.
Normally if production planning is not in use, then valuation is done at the company code
level. Otherwise valuation is done at the plant level.
2

A plant has a physical location and an address and can belong to one company
code/country only.

Several Storage Locations ( Physical storate locations or virtual ) can be assigned

to a single plant.

Each plant is assigned to one company code only.

The menu path to configure the plant is [SPRO->IMG->Enterprise Structure->Definition>Logistics General->Define/Copy/Check plant ]

Storage Location:
This level contains the data specific to a storage location. Stock levels are an example of
the data maintained for each storage location. This organizational unit represents a
location where stock is physically kept. Multiple such storage locations can belong to one
plant. However as described in the Plant section, only quantity can be calculated at the
storage location level and not value.

The next level below storage location is the

Warehouse. However, each warehouse can be assigned to multiple storage locations.

The menu path to configure the storage location is [SPRO->IMG-Enterprise Structure>Definition->Material Management->Maintain Storage Location]

Purchasing Organization:
An organizational unit responsible for procuring materials or services for one or
more plants and for negotiating general conditions of purchase with vendors. The
purchasing organization assumes legal responsibility for all external purchase
transactions. Purchase organization is an independent, physical organizational unit which
is responsible to purchase materials, goods and services from external vendors/plants.
The purchasing organization is also responsible for establishing agreements with vendors.
There can be multiple types of purchase organizations in SAP.
3

Centralized Purchase Organization This is an umbrella organizational unit

responsible to purchase goods/services for all the plants under all the company codes.

Company specific purchase organization This purchase organization is

responsible to purchase goods/services for the plants assigned to one company code only.

Decentralized Purchase Organization This is responsible to purchase

goods/services for a specific plant under one company code only.

Reference Purchase Organization This organizational unit is used to share

certain master data ( Vendor master, pricing data ) and transactional data ( outline
agreements, contracts etc ). Many purchase organizations can be assigned to a single
reference purchase organization.
The path to configure Purchase Organization can be found under
[SPRO->IMG -> Enterprise Structure -> Definition -> Materials Management->
Maintain Purchasing Organization]

Purchasing Group:
The purchasing organization is further subdivided into purchasing groups (buyer
groups), which are responsible for day-to-day buying activities. A purchasing group can
also act for several purchasing organizations
Each purchase organization is assigned to a company code. The menu path to do
the same is [SPRO-IMG->Enterprise Structure-> Assignment-> Material Management>Assign Purchase Organization to Company Code ]

ASSIGNMENTS OF ORGANIZATIONAL LEVELS "PLANT", "PURCHASING

ORGANIZATION", AND "COMPANY CODE"

Plant - purchasing organization/company code

In the SAP system, a plant must be assigned to one or more purchasing
organizations.
Furthermore, a plant must always be assigned to a company code.

Purchasing organization company code

A purchasing organization can (but need not) be assigned to a company code.
If you do not assign a company code to a purchasing organization, the latter can
engage in procurement operations for every company code.
A prerequisite for this is that the plant for which procurement is carried out is
assigned to the purchasing organization.

ORGANIZATION OF PURCHASING
CENTRALIZED/DISTRIBUTED PURCHASING
You can organize your purchasing function in the following ways:

Centralized purchasing, with just one purchasing organization

5

Distributed purchasing, with a number of different purchasing organizations each

responsible for different plants

The following graphic illustrates the different ways of organizing your purchasing
function in the SAP System:

ADVANTAGES OF A PURCHASING ORGANIZATION

A reference purchasing organization can negotiate a comprehensive contract that

can be used by other purchasing organizations.
6

The purchasing organizations responsible for procurement in the individual plants can
issue release orders against this Centrally Agreed Contract, thus availing themselves of
its more favorable terms and conditions.

More information on centrally agreed, corporate-wide contracts is available in the

section Centrally Agreed Contract .

SAP Application Link Enabling (ALE) allows individual companies belonging to a

group but working with separate SAP systems to make joint use of contracts. In such
cases, the latter are referred to as distributed contracts.

CROSS-COMPANY-CODE STOCK TRANSFER

You can set up your system in such a way that one purchasing organization procures
material for a plant from a vendor (plant) that belongs to another company code within
the same client (corporate group). This is an instance of an cross-company-code (intercompany) stock transfer with an SD delivery and a billing document.