Organizational Structures in Retail

Objective

After completing this lesson, you will be able to analyze Organizational Structures and their Assignments supported by SAP Retail and their basic requirements for SAP Retail

SAP Retail Overview

From an application point of view, we are going to focus on the SAP S/4HANA Retail for merchandise management (on premise) solution capabilities in this course. For simplification reasons, this solution is referred to as SAP Retail in our IRT310 course. SAP Retail core features and functions for example include master data management, buying, logistics, sales, and store operations.

Note

In the retail industry, specific terms differ from the standard terms used in other lines of business. The following terms are used synonymously in this document:

Standard Terms in Lines of Business	SAP Retail
Material, Product	Article
Material group, Product group	Merchandise category
Plant, Location	Site
Supplier	Vendor

Organizational Structures

Flexible organizational units in SAP Retail make it possible to map even complex organizational structures. A large number of organizational units makes it possible to map the legal and organizational structure of a retail company from different business viewpoints. Many organizational units are also data retention levels, which means that, when there are several organizational units like this, different data can be stored for each one.

SAP Retail is client-capable. A client is a corporate group that can subdivide into subsidiaries. In SAP Retail, organizational units can be set up for the individual departments of a company.

This means that the organizational units reflect the subdivision of a company from a business viewpoint in SAP Retail.

A diagram illustrating two sections: Business Views on the left, listing areas like Cost Accounting and Inventory Management, and Organizational Units on the right, detailing hierarchical relationships among clients, companies, and various organizational roles, including Purchasing and Sales Organizations.

The variable organizational structures in the SAP system offer the following advantages:

The flexibility to be able to map complex company structures
Separate logistical views (purchasing, sales and distribution), the managerial accounting view and the external accounting view
The option of cross-company-code processing

Organizational structures are maintained in Customizing (Implementation Guide). They must be created individually and then assigned to each other.

The most important organizational units in SAP Retail are listed below.

Flowchart illustrating a business structure, showing client, operating concern, controlling area, company codes, cost center, and profit centers.

Organizational structures are used to:

Map the individual parts of a company (for example, Purchasing, Sales)
Ensure that all subareas of the company are linked together in the organizational structure

A client corresponds to a corporate group, which can be subdivided into subsidiaries.

From an (external / legal) Financial Accounting point of view, an enterprise is subdivided into company codes. A company code is an independent organizational unit that balances accounts in accordance with legal requirements. It can be divided into business areas. This means that all the transaction figures and financial statistics (for example, P&L) can be managed and analyzed for each business area.

In a central organization, one uniform, usually a maximum chart of accounts is created at corporate group level and this is then valid for all company codes. In a decentralized organization, the chart of accounts is assigned on company code level.

Each valuation-relevant transaction creates a Financial Accounting document, which lists the G/L accounts posted to and the details of the posting.

Thecontrolling area is the organizational unit used to subdivide the business organization from a cost accounting standpoint. Cost centers are organizational units within a controlling area and represent a defined location of cost incurrence. They can be defined based on functional requirements, allocation criteria, physical location, or responsibility for costs.

The operating concern is an organizational unit in (internal) accounting (Controlling), which structures an enterprise from the Profitability Analysis point of view. You can calculate an operating profit or contribution margin for the individual market segments that are defined by a combination of classifying characteristics (such as merchandise category, country, or distribution channel). Several controlling areas can be assigned to one operating concern.

Profitability Analysis represents a market-oriented approach with the aim to provide your sales, marketing, product management and corporate planning departments with information to support internal accounting and decision-making.

The profit center is an organizational unit in accounting that reflects a branch or division of a company that is accounted for independently for the purpose of profit calculation. Retailers often use the organizational level of profit center in order to measure and compare profit and losses of their stores from a finance perspective.

Flowchart showing client structure with boxes for Client (401), Company Code (R300, 0001), and Valuation Areas (R100, R700, 0001).

A site can be a store, a distribution center, or a production location. In SAP Retail, the site is the selling and inventory management organizational unit. Every site belongs to just one company code.

Stocks are updated by goods movements on both a quantity and value basis. The relevant G/L accounts in accounting, which are affected by this transaction, are determined and posted to via automatic account determination.

A valuation area is the organizational unit for value-based inventory management. In SAP Retail, the valuation area must always correspond to a site. Inventory management on a value-only basis is carried out at valuation area level.

Every site is a valuation area in SAP Retail. This is already determined when the system is set up as a Retail system and it is unchangeable. The valuation area does not appear on the screen, it is controlled internally.

Franchisees

Generally: Franchisees can be represented in the central SAP Retail system as sites or customers, and the decision depends on the actual business requirements.

The tighter the integration to the Retailer’s business processes, the more likely a site master will be created for a franchisee. If only a common marketing concept is in place, but otherwise the franchisee acts as a more or less fully independent customer, a customer master record may be sufficient.

A franchisee can be modeled as a site:

If Financial Accounting is not active for the franchisee, all franchisees can be assigned to one company code. This company code can be considered a "dummy" company code.

If Financial Accounting is active for the franchisee, it must be assigned to its own (active) company code. All the stores of a franchisee are assigned to the appropriate company code.

You can activate Inventory Management for a franchisee’s site(s), regardless of whether FI is active or not (own active or dummy company code). You must make the relevant Customizing settings for updating quantities and values for each material type. When inventory management is active, for example the standard SAP Retail replenishment functions can be set up for the franchisee.

Note: If the retail store operations apps should be used for merchandise management functions by the franchisee, franchisees must be modeled as sites.

A franchisee can be modeled as a customer:

If e.g. financial accounting and inventory management should not be supported in the central SAP Retail system for the franchisee. The franchisee’s stock can be separated against own stock using customer consignment.

Logistics

Flowchart illustrating a client structure: includes client, purchasing organization (R300), and purchasing groups (R30, R31) linked to different entities.

A purchasing organization procures merchandise for several sites and negotiates purchase conditions with the vendors. This is the business unit legally responsible for all purchasing activities, and serves as a data retention level (key field) for purchasing-related master data and conditions, as well as in business documents, e.g. a purchase order. Authorizations for master data maintenance and purchasing management are assigned per purchasing organization.

A purchasing organization can be assigned to one company code. If this is the case, the purchasing organization can only purchase for sites that belong to the same company code.

A reference for one purchasing organization can also be applied to another purchasing organization, so that the conditions, contracts and purchasing info records can be used together.

A purchasing group consists of one or more buyers and in that represents a purchasing department. Purchasing groups are responsible for maintaining master data and control data, and for operational purchasing activities. Authorizations can be assigned to each purchasing group individually. The purchasing group is not a data retention level.

* A purchasing area can (optionally) be used as a connecting link between the purchasing organization and the purchasing group. It is then used as an additional hierarchy level for reporting. However, it is not a data retention level. In order to map this connecting link, one purchasing area is assigned to a combination of a purchasing organization and one or more purchasing groups in Customizing. (IMG: → Materials Management → Purchasing → Maintain Purchasing Area, and: … → Purchasing Area Determination).

Flowchart showing organizational structure: Client, Site, Storage location, eWM, and Warehouse number with labeled nodes.

To be able to keep track of the goods flow in the company, article stocks must be managed on a quantity basis in the system. Stocks are managed for each individual site and storage location.

In SAP Retail, the site is the selling and inventory-managing unit. A site can be a store or a distribution center.

The storage location is an organizational unit that makes it possible to differentiate between stocks in a site. In a distribution center, different storage locations are used to map various logistical functions: For example, a full warehouse management storage location, a cross-docking storage location, a lean-WM managed storage location. A distribution center is usually subdivided into more than one storage location to map the physical structure, for example, to distinguish between a high-rack storage building and an outside warehouse, and to allow separate inventory management for each storage location. Individual storage locations of a distribution center can be connected to a warehouse management system using a warehouse number. This is a 3-digit number in case of SAP Warehouse Management (WM), and a 4-digit number in case of SAP Extended Warehouse Management (EWM). Usually a store has one storage location, but an additional storage location could for example be defined for a separate sales section, such as an outdoor stock sales area (camping articles, garden furniture).

In the distribution center, you can differentiate between stocks of an article within one storage location on the basis of batches. It is also possible to maintain expiration dates, for example through the relevant information on the storage unit (does not require batch management then).

Diagram illustrating warehouse layout with storage locations, doors, staging areas, and storage types for eWM system.

eWM: extended Warehouse Management

MM: Materials Management

Transactions that cause a change in stock and the resulting stock updates are entered in the system in real time, enabling physical stock levels to be mirrored exactly in the inventory management.

There are three different organizational structure options in a distribution center: inventory management on the storage location (MM-managed storage location), inventory management on the storage location with a storage location that is managed by a lean WM, and inventory management on the storage bin with a WM-managed storage location = Warehouse Management system.

For complex distribution centers, the Warehouse Management system allows stock to be differentiated up to storage bin level. This means that structures, such as those of a high rack storage area, can be displayed.

The Warehouse Management system is integrated into the whole system by connecting a storage location to a warehouse number. If, for example, a goods receipt is posted to the inventory management, an action to put away the goods is triggered in the Warehouse Management. A complex warehouse structure is managed under a warehouse number.

Various partial warehouses, the organizational and technical attributes of which differ, are defined as storage types, such as the goods receipt area, goods issue area, high rack storage area and picking bin. The individual storage bins are defined in a storage type. They are the smallest organizational units that can be called in the system. They can be called using coordinates such as 05-04-03 for aisle 05, stack 04, level 03. When an article appears on a storage bin, it is flagged as quant.

Transport orders are used to transport the articles within the warehouse (for example, from the goods receipt area to the storage bin).

The Lean WMis a warehouse structure with which transport orders can be used as pick orders, even in simply structured warehouses. Transport orders can be created for deliveries (excluding goods receipts or goods issue), even if storage bins are not managed in the WM. Inventory management occurs at storage location level only. The system does not use quants to update the stock data at storage bin level, but display fixed bins for information only.

You can use the Lean WM if you want to pick deliveries using transfer orders in a warehouse that you do not manage with the Warehouse Management system.

The sales organization is an organizational unit in logistics, which subdivides the company according to the requirements of sales and distribution.

Every sales organization represents a selling unit in the legal sense and is, for example, responsible for product liability and any customer's rights of recourse. It is also responsible for the sales and distribution of the article, and negotiates sales conditions. You can use sales organizations to divide your market into regions, for example, into countries. A complete business transaction in sales and distribution is always managed in a sales organization.

In SAP Retail, a sales organization can be assigned to a purchasing organization. For statistical purposes, this may be of interest.

A sales organization can reference another sales organization at sales document type level. This means that the sales organization can then use the same sales document types as defined for the referenced sales organization.

A retailer can sell products through various channels, which are represented in the system as distribution channels. Possible distribution channels for sales to the consumer include, for example, various store chains, digital commerce channels (such as e-commerce, mobile commerce), or mail order. In combination with the distribution channel, the sales organization forms a distribution chain. This means, the distribution channel is assigned to a sales organization. The distribution chain for example serves as both reporting and data retention level, for example master data, and sales price conditions can be defined on this level.

In SAP Retail, the distribution chain category of a distribution chain determines, if it will be used to supply sites or wholesale customers respectively, or to supply consumers. For example, assignments of a distribution chain to a site can be deleted in customizing (IMG: → EnterpriseStructure →Assignment →Salesand Distribution →AssignSales Organization — Distribution Channel — Plant). The related distribution chain will then also be removed from the site in the master data (WB03).

References to other distribution chains in the same sales organization can be created for a distribution chain. This means that customer and article master data, as well as condition data can be accessed from the distribution chain that is being referenced.

A division must be defined, although SAP Retail does not use it in the retail functions. Together with the division, a distribution chain forms a sales area. If just one division is created (in general recommended for SAP Retail), then the sales area is functionally almost identical to the distribution chain for retail.

Copy Function

In the SAP System, you have the option of processing existing organizational structures. The following functions are available:

Copy:
Use this function if you want to create a new organizational unit and want to use the existing settings as a template. For example, you can copy the distribution channel in customizing (IMG: → EnterpriseStructure →Definition →Salesand Distribution →Define,copy, delete, check distribution channel → Copy, delete, check distribution channel).
Delete:
Use this function if you want to delete an existing organizational unit with all dependent entries.
Check:
Use this function to check all the settings for an existing organizational unit.

Please note that only the system settings (in Customizing) are copied or deleted. Master data is not included in this process. However, for example when using the copy function, the relevant master data assignments are copied as well.

If you only want to process mandatory activities in the system settings, for example to reduce manual configuration efforts, then you must use the copy function to create the new organizational units. This is the only way you can make sure all the necessary system settings will be created.

Display the Organizational Structures, Personalize your Settings

Display the maintenance of organizational structures.

Steps

From Exercise — Display the Organizational Structures, Personalize your Settings, demo the first two tasks:
Task — Organizational structure — Company Code
Task — Organizational structure — Distribution Chain
Additionally, explain the copy function: When organizational structures are copied, all the dependent entries defined in Customizing are copied, too. The same tool can be used to delete data and therefore also delete the Customizing settings and assignments.
Demonstrate the copy function:
IMG:→Enterprise Structure→Definition→Sales and Distribution→Define, copy, delete, check distribution channel→Copy, delete, check distribution channel
Copy distribution channel R2 to Z9 (use the button copy org object).
Show, that the existing assignments of distribution channel R2 are now also available for Z9. IMG:→Enterprise Structure→Assignment→Sales and Distribution→Assign distribution channel to sales organization. Show that the table contains an entry for RP10 / Z9. This was copied from the existing entry RP10 / R2.
Explain how to delete assignments, for example of a distribution chain to a site:
IMG:→Enterprise Structure→Assignment→Sales and Distribution→Assign Sales Organization — Distribution Channel — Plant
Delete the assignment of the distribution chain RP10 / Z9 to store RG00. You can then also see in the store master (WB03, store RG00, Distribution chains — Plant), that the distribution chain was removed.
Now demo the last task of the exercise, and tell the participants they have to do this task, so they will be able to smoothly work in the system for the rest of the week.
From Exercise — Display the Organizational Structures, Personalize your Settings the participants perform
Task — Organizational structure — Company Code
Task — Organizational structure — Distribution Chain

Set Up Default Values

Business Example

You use SAP Retail as a retailing system in your company. Now make some default settings in the system so that you can work through the processes in this course more easily.

Task 1: Set Up SAP Retail as your Initial Screen

You want to set the retailing menu (SAP Retail) as the initial screen for your user. This menu will appear automatically every time you log on to your system in the future.

Steps

Some basic preparation work for your system user is required, so you can efficiently work in the system and perform the exercises as described. The first step is to bring up the Retail Start Menu automatically with each logon. Then, we also specify the organizational units of our Retail model company, to have the relevant fields automatically populated in the applications. Lastly, we’ll also add a transaction to the favorites list for quick access.
To bring up the Retail Start Menu automatically with each logon, access the function for maintaining your user defaults by choosing System→User Profile→User Data. Select the Defaults tab page and enter transaction W10U as your start menu. Save the entries you have made.
1. System→User Profile→User Data
  Make your settings as specified in the task. The system opens a second session. The system issues the following message:
  User IRT310-## has changed
Make sure the SAP Easy Access menu for Retailing is now available. How do you recognize this? What are the first four main entries of the Retailing menu?
Note
From the SAP Easy Access SAP Merchandising menu, open the Logistics Folder to access the Retailing menu.
1. Check the title bar. It should say: SAP Easy Access SAP Merchandising. In the SAP Menu, the first three entries are financial Services Network Connector, Office, and Logistics. Open the Logistics Folder to access the Retailing Menu. The first four menu entries are:
  - Master Data
  - Purchasing
  - Merchandise Logistics
  - Sales

Task 2: Maintain Further Settings in the User Profile

If you want the values for the organizational structures to be proposed as default values in the fields of some of the transactions, you can enter these values in your user profile.

Steps

To access the function for maintaining your user parameters, choose System→User Profile→User Data and choose the Parameters tab. Call up the F4 help in the Parameter ID column. On the Restrictions tab page, click on the long, thin bar containing the gray triangle. You can now make entries in the Short Description field as specified in step 2.
1. System→User Profile→User Data
In this client, you normally work with company code R300 in purchasing organization R300 and you are assigned to purchasing group R30.
You usually work with the 'Stores US' store distribution chain, which consists of the sales organization RG10 and distribution channel R1. In addition, you want the value R1 to be displayed for the division.
Use the F4 help and enter the following terms in the Short Description field. Note that the entry is case-sensitive!
Company code, Purchasing organization, Purchasing group, Sales organization, Distribution channel, and DIVISION.
Enter the keys as parameter IDs and their values as parameter values and then save your settings.
Note
Make sure you use capital letters only, for both the Set/Get parameter IDs, and the Parameter values.
1. Make your settings as per the task. Maintain the following parameter ID and parameter values:
  Parameter ID Parameter value Short description
  BUK R300 Company code
  EKO R300 Purchasing organization
  EKG R30 Purchasing group
  VKO RG10 Sales organization
  VTW R1 Distribution channel
  SPA R1 DIVISION

Task 3: Create Favorites

In a later exercise, you will use a transaction code, which is not mentioned in the SAP Retail menu. Therefore you will add it in advance to your favorites.

Steps

Add the goods movement transaction MIGO to your favorites folder.
In the Easy Access SAP Retail menu, perform a right-mouse click on the Favorites folder, and choose Insert Transaction. In the pop up, enter transaction code MIGO and choose Continue. This adds the Goods Movement transaction to your favorites list.
In order to familiarize yourself with the transaction codes in the Retail menu, you can have the system display them in the menu tree. In the pull-down menu, choose Extras→Settings, and set the flag at Display Technical Names.
1. Make the settings as specified in the task.
Optionally, you can further personalize your settings. To do so, choose the Customize Local Layout icon in the toolbar, and select Options.
In the Interaction Design Folder, you can personalize the settings as you wish.
1. This is an optional step.

Display the Organizational Structures

Business Example

A new employee needs to become familiar with the most important elements of your company structure quickly. Show the organizational elements in the customizing of the SAP system to the new employee.

Task 1: Organizational structures — Company Code

Get an overview of the existing organizational structures, and display the company code used throughout this course in the Implementation Guide (IMG).

Steps

View the definition and assignments of some organizational elements in the SAP Reference IMG:
1. Tools→Customizing SAP→IMG→Execute Project→SAP Reference IMG
  Expand the Enterprise Structure. Here you find the Definition and Assignment menu areas of the organizational elements. The further breakdown of both these menu areas looks as follows:
  - Financial Accounting
  - Controlling
  - Logistics — General
  - Sales and Distribution
  - Materials Management
  - Logistics Execution
  - Plant Maintenance
  - Human Resources Management
Where in the Implementation Guide can you find the definition of a company code ? Specify the menu path.
________________________________________________
1. IMG: Enterprise Structure→Definition→Financial Accounting→Edit, Copy, Delete, Check Company Code→Edit Company Code Data
2. Edit Company Code Data
For the duration of the course you will use R300 as your company code. What is the name of this company code?
______________________________________________________
Which currency and language are set by default in company code R300?
______________________________________________________
1. Select R300 and choose Details. The following settings are maintained:
  Field name or data type values
  Company Code R300
  Company Name IDES Retail INC US
  City Los Angeles
  Ctry/Reg. US
  Currency USD
  Language EN

Task 2: Organizational structures — Distribution Chain

You now work more closely with the company’s organizational units. Check the existing assignments of sales organization RG10.

Steps

Which organizational units form a distribution chain?
______________________________________________________
1. A distribution chain is formed from the sales organization and distribution channel organizational units.

What distribution chains are there for sales organization RG10?

______________________________________________________

IMG:→Enterprise Structure→Assignment→Sales and Distribution→Assign distribution channel to sales organization

SOrg.	Name	DCHl	Name
RG10	General Merch. Store	00-30	IRT320 Group ##
RG10	General Merch. Store	40-70	IRT320 Wholesale ##
RG10	General Merch. Store	R1	Stores US
RG10	General Merch. Store	R5	Distribution US
RG10	General Merch. Store	R6	PCS Wholesale
RG10	General Merch. Store	R7	Internet/Catalog US

To which company code is the sales organization RG10 assigned?
______________________________________________________
1. IMG:→Enterprise Structure→Assignment→Sales and Distribution→Assign sales organization to company code
  Sales organization RG10 is assigned to company code R300.

Continue to quiz

Parameter ID	Parameter value	Short description
BUK	R300	Company code
EKO	R300	Purchasing organization
EKG	R30	Purchasing group
VKO	RG10	Sales organization
VTW	R1	Distribution channel
SPA	R1	DIVISION

Field name or data type	values
Company Code	R300
Company Name	IDES Retail INC US
City	Los Angeles
Ctry/Reg.	US
Currency	USD
Language	EN