Identifying the Organizational Units in Procurement

Objective

After completing this lesson, you will be able to explain the enterprise structure relevant for procurement processes

Overview of Organizational Units in Procurement and Inventory Management

Organizational units in the SAP system represent the structure of a company. In other words, they correspond to the legal and/or organizational units of an enterprise. SAP provides organizational units for all areas of your company (such as accounting, purchasing, production, and warehousing). We focus on the elements that are relevant for purchasing and inventory management.

The organizational unit Purchasing Organization is used exclusively in purchasing processes. Other organizational units, such as the Company Code or Plant, belong to other areas and are also used in extra processes, and not only in the external procurement.

The organizational levels are defined and assigned in Customizing for the enterprise structure.

The organizational units relevant for external procurement are shown in the figure Organizational Levels in the Procurement Process.

Diagram showing the organizational levels in the procurement process. The process is explained in the following text.

Client

The client is a unit within an SAP system that is self-contained both in legal and organizational terms, and is represented as separate master records and an independent set of tables. For example, the client could represent a corporate group.

The client is the highest hierarchical level in the SAP system. Specifications or data that you make and enter at this level apply to all company codes and other organizational units. Therefore, you do not have to enter the specifications and data at the client level more than once in the system. This ensures a uniform data status.

Access authorization is assigned on a client-specific basis. A distinct user master record must be created between each user and the client. If the Client field has not been prepopulated, each user must specify a client key when logging on to the SAP system. All user input is stored, processed, and evaluated on a client-specific basis.

A client is uniquely defined in the system by a three-digit numeric key.

Company Code

The company code is the smallest organizational unit in external accounting for which a complete, self-contained bookkeeping system can be maintained.

A company code represents an independent unit that produces its own financial statements, such as a company within the corporate group (a client). You can set up several company codes for the same client to keep separate sets of accounts.

A company code is defined in the system by a four-character alphanumeric key that is unique for the client.

Plant

The plant is an organizational unit within logistics that subdivides an enterprise from the viewpoints of production, procurement, plant maintenance, and materials planning.

A plant may represent various entities within a firm, such as:

Production facility
Regional sales office
Corporate headquarters
Maintenance location

A plant is defined in the system by a four-character alphanumeric key that is unique to it in the client.

Storage Location

The storage location is an organizational unit that facilitates the differentiation of stocks of materials within a plant. Inventory management on a quantity basis is carried out in the plant at the storage location level. The physical inventory is also carried out at this level.

A storage location is defined by a four-character alphanumeric key. The key is unique within a plant.

Enterprise Structure

Organizational Elements in Purchasing

Purchasing Organization

A purchasing organization is an organizational unit within logistics that subdivides the enterprise according to the purchasing requirements. A purchasing organization procures materials or services, negotiates conditions of purchase with vendors, and assumes responsibility for these transactions.

The organizational integration of purchasing into the company structure is done by assigning a purchasing organization to:

One company code (optional)
One or more plants

You can use the corresponding assignments to show whether purchasing is organized centrally or noncentrally in your company.

If a purchasing organization is to operate across company codes (decentralized, strategic purchasing), there is no assignment between company codes and purchasing organizations. In this case, plants from all company codes can be used for the "purchasing organization to plant" assignment.

However, if a purchasing organization is assigned to a company code, only plants from the selected company code can be used for the "purchasing organization to plant" assignment. Note that a purchasing organization can only belong to one company code. However, if necessary, several purchasing organizations can be assigned to a company code.

There is a many-to-many relationship between purchasing organizations and plants. In other words, you can assign several plants to one purchasing organization, and one plant to several purchasing organizations. The plant to purchasing organization assignment is a necessary setting and cannot be omitted.

The different assignment options between company codes, plants, and purchasing organizations yield the following categories of purchasing organization:

Plant-specific purchasing organization.
Cross-plant purchasing organization.
Cross-company-code purchasing organization.

Diagram outlining assignment options for purchasing organizations. Details are provided in the following text.

Plant-Specific Purchasing Organization: In plant-specific procurement, a purchasing organization is responsible for procuring materials for just one plant. You make the following assignments in the enterprise structure:

Assign the purchasing organization to a company code.
Assign one plant to the purchasing organization.

Cross-Plant Purchasing Organization: If a purchasing organization has to procure materials and services for several plants belonging to a company code, you are able to set up a cross-plant purchasing organization. You make the following assignments in the enterprise structure:

Assign the purchasing organization to a company code.
Assign several plants (belonging to one company code) to the purchasing organization.

Note

The assignment purchasing organization to plant is always necessary, even if the purchasing organization is responsible for all plants of the company code. It is not enough to make the assignment between company code and purchasing organization alone.

Cross-Company-Code Purchasing Organization: When setting up cross-company-code purchasing, the purchasing organization may not be assigned to any company code. Only the assignment of the plants is necessary.

Purchasing Group

Another variable for internal structuring of purchasing is the purchasing group. A purchasing group is a key to representing a buyer, or group of buyers, responsible for certain purchasing activities. The purchasing group is internally responsible for the procurement of a material or class of materials. Externally, the purchasing group is the contact person for the suppliers. The purchasing group is not assigned to other units in the company structure.

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