Organizational Units - SAP

Purpose of Unit
The purpose of this Unit is to establish the Organizational Structure for Material Management (MM).
Once the various organizational elements are defined they will need to be assigned. This unit will
establish the core structure necessary to conduct material management transactions within the
system.

Organizational Structures (Materials Management)

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Organizational Units - SAP

Exercise : Verify Valuation Area

Purpose of Exercise
The purpose of this exercise is to verify that the valuation area is set to plant level.

Having the valuation set at the plant level facilitates plant level materials requirements planning.

Navigation
Menu Path:
Tools → Customizing → IMG → Edit project → Enterprise
Structure → Definition → Logistics – General→ Define valuation level

Transaction OX14
Code:

The defined valuation level is preset at the plant level.

The valuation level is an important configuration step because it specifies the level at which
material stocks are valuated for the whole client. There are two options for the valuation level:

⮚ plant level or

⮚ company code level.

There are several situations in which there should be valuation at the plant level, e.g., if
Production Planning or Costing will be implemented, or if the application is using the SAP retail
system. Once a valuation is determined, it should not be changed.

Assigning a Plant

Once a valuation level has been established, it is possible to assign a plant to an existing
company code. This assignment is performed so that all plant transactions can be attributed to a
single legal entity; that is, a company code.
Exercise : Review creation of Company Code
Purpose of Exercise
The purpose of this exercise is to define a company code. A company code represents a legal
organizational entity and a separate accounting unit in Financial Accounting (FI). This organizations
element is often referred to as a balanced set of books. The company code is the level at which all

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accounting transactions are captured.

Navigation
Menu Path Tools → Customizing → IMG → Edit project → Enterprise
structure → Definition → Financial accounting →
Edit, copy, delete, check company code

Trans Code SPRO will Display IMG menu i.e. SAP Reference IMG, follow the menu path there after.

Double click on Edit Company Code

Table Name: T001

Exercise : Review creation of Plant
Purpose of Exercise
This exercise will allow you to review a plant. A plant is an organizational structure within our
company.
As an organizational structure, the plant is assigned to a company code. However a company code
can have several plants.

Navigation
Menu Path Tools → Customizing → IMG → Edit project → Enterprise
Structure→ Definition→ Logistics - General→ Define, copy, delete, check plant

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Organizational Units - SAP

Trans Code SPRO will Display IMG menu i.e. SAP Reference IMG, follow the menu path there after.

⮚ Double click on the Define plant line.

⮚ Select Plant 1000 and click on details

What is a Plant?
The definition of a plant depends on its use. From a materials-management view, a plant can be
defined as a location that holds valuated stock. A production-planning view defines a plant as an
organizational unit that is central to production planning. A plant also can be defined as a
location that contains service or maintenance facilities. The definition of a plant will vary
depending on the need of the customer.

Prerequisites for a Plant

Before setting up a plant, certain other settings need to be defined. These are described below.

⮚ Factory Calendar
A factory calendar identifies the workdays, public holidays, and company holidays. The
SAP system is delivered with some factory calendars, but a new factory calendars can be
configured based on a company’s schedule.
⮚ Country Key
A country key is required to define a plant. The system is delivered with country keys, and
new country codes need to be configured if they are not in the system.

⮚ Region Keys
A region code is required along with the country code. The region is defined as a state or
province associated with a country.

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Organizational Units - SAP

Table Name: T001W

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Organizational Units - SAP

Exercise : Review Storage Locations (Inventory and Quality)

Purpose of Exercise
This exercise you will review the locations where our inventory will be physically kept.

A storage location is where the quantity of inventory is managed not the value. The value is
managed at the plant level.

A plant can have more than one storage location.

Navigation
Menu Path Tools → Customizing → IMG → Edit project →
Enterprise Structure→ Definition→ Materials Management→
Maintain storage location

Trans Code OX09

Enter the following information:

⮚ Enter your Plant: 1000

⮚ (Enter)

5E

What is a Storage Location?

In its systems, SAP traditionally defines a storage location as a place where stock is physically
kept within a plant. There will always be at least one storage location defined for one plant. It is
the lowest level of location definition within the Materials Management module.
Table Name: T001L

Exercise : Review Purchasing Organization

Purpose of Exercise

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The purpose of this exercise is to create the Purchasing Organization. The purchasing organization
procures materials and services, negotiates conditions of purchase with vendors, and bears
responsibility for such transactions.

The purchasing organization is the organizational unit that subdivides an enterprise according to the
requirements of purchasing.
Navigation
Menu Path Tools → Customizing → IMG → Edit project →
Enterprise Structure → Definition → Materials Management → Maintain purchasing
organization

Trans Code SPRO will Display IMG menu i.e. SAP Reference IMG, follow the menu path there after.

What is a Purchasing Organization?

A purchasing organization is simply defined as a group of purchasing activity that is associated

with all or a specific part of the enterprise.
Table Name: T024E

Exercise: Review Purchasing Group

Purpose of Exercise
A purchasing organization (such as created in the previous exercise) can be subdivided into
purchasing groups, which consist of buyers responsible for certain day-to-day purchasing activities
(e.g., precious metals, services, etc.).

Navigation
Menu Path Tools → Customizing → IMG → Edit project →

Materials management → Purchasing → Create purchasing groups

Trans Code SPRO will Display IMG menu i.e. SAP Reference IMG, follow the menu path there after.

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Organizational Units - SAP

What is a purchasing Group?

The purchasing group can be defined as a person or group of people dealing with a certain
material or group of materials purchased by through the purchasing organization.
Table Name: T024

Exercise : Assign Plant to Company Code

Purpose of Exercise
This exercise has you assign your plant to your company code. This will facilitate the recording or
tracking of transactions at the plant level. Each plant must be assigned to a company code. A plant
can only belong to one company code.

Navigation
Menu Path Tools → Customizing → IMG → Edit project → Enterprise
Structure → Assignment → Logistics - General → Assign plant to company code

Trans Code OX18

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Table Name: T001K

Exercise : Assign Purchasing Organization to Company Code

Purpose of Exercise
The purpose of this exercise is to assign your purchasing organization to your company code. The
assignment can be done differently based on the type of purchasing your organization does. For
example:
● You can assign a purchasing organization to several company codes. This facilitates
corporate-group-wide purchasing.
● You can assign a purchasing organization to one company code. This facilitates company-
specific purchasing.
● You can assign a purchasing organization to no company code. This purchasing
organization can then procure for all plants assigned to it, without regard to the company
code to which it belongs.

Navigation
Menu Path Tools → Customizing → IMG → Edit project → Enterprise
Structure → Assignment → Materials management → Assign purchasing organization to
company code

Trans Code OX01

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Types of Purchasing Organizations

⮚ Purchasing at an Enterprise Level

Purchasing for a SAP customer may take place at the highest level within an organization. If a
customer has a central purchasing department that co-ordinates purchasing for all companies
within the enterprise, then the purchasing organization can be configured in that manner. The
purchasing organization is defined in SAP

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and then assigned to all companies.

⮚ Purchasing at the Company Level

If a SAP customer does not have a single enterprise wide purchasing function, it may have
purchasing centralized for each company. This may be appropriate for customers with companies
in various countries, in which case an enterprise purchasing department may not be possible. In
this scenario the purchasing organization is created and assigned for each company code. Even
with this scenario, a purchasing organization may cover several companies. For example, a
purchasing organization for Latvia may be assigned as the purchasing organization for the
companies based in the countries of Latvia, Lithuania, and Estonia.

⮚ Purchasing at the Plant Level

In an enterprise that has companies with large autonomous plants the purchasing decisions may
be made at a local level. The SAP customer may decide that assigning one purchasing
organization to one company is not appropriate, and it would be a better business decision to
assign a purchasing organization at the plant. This scenario has an advantage when the vendors
are at a local level and few vendors supply materials or services to more than one plant.

⮚ Reference Purchasing Organization

One purchasing organization can be defined as a reference purchasing organization. This is a
purchasing organization that can be set up as a strategic purchasing department. In large
companies, the strategic purchasing function analyses purchasing data and works to negotiate
the best prices for material and services from global vendors. This strategic purchasing
department can obtain prices and special conditions that can be used by purchasing
organizations across the enterprise. Often this reference purchasing organization is not assigned
to any company code, as it is a function of the whole enterprise. A purchasing organization must
be assigned to this reference purchasing organization to have access to the information on the
system.

Exercise : Assign Purchasing Organization to Plant

Purpose of Exercise
This exercise allows you to assign your purchasing organization to a plant for plant specific
purchasing.

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

Navigation
Menu Path Tools → Customizing → IMG → Edit project →
Enterprise Structure → Assignment → Materials Management →
Assign purchasing organization to plant
Trans Code OX17

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Table Name: T024W

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Organizational Units - SAP

Exercise : Assign Purchase Organization to reference purchase

organization
Purpose of Exercise
This exercise allows you to assign your purchasing organization to reference purchase organization.

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

Navigation
Menu Path Tools → Customizing → IMG → Edit project → Enterprise
Structure → Assignment → Materials Management → Assign purchasing organization to
reference purchase organization

Trans Code SPRO will Display IMG menu i.e. SAP Reference IMG, follow the menu path thereafter.

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