Defining Organizational Units in Materials Management

Objective

After completing this lesson, you will be able to define organizational units in accounting and purchasing

Organizational Units in Accounting

The company address and the country in which the company is located
The chart of accounts (list of general ledger accounts)
The currency in which the local books are kept
The fiscal year variant (specification of the periods and special periods of a fiscal year)
The credit control area
The determination whether financial statements are to be created at the business area level

You define company codes in Customizing for Enterprise Structure under Definition → Financial Accounting.

The CHART OF ACCOUNTS is assigned in Customizing for Financial Accounting under Financial Accounting Global Settings → Global Parameters for Company Code → Enter Global Parameters.

You can set up BUSINESS AREAS within your company to differentiate between various fields of activity or areas of responsibility. You define the business areas in Customizing for Enterprise Structure under Definition → Financial Accounting → Define Business Area.

The CONTROLLING AREA is an organizational unit within a company for which you can carry out complete, self-contained cost accounting. A controlling area can cover one or more company codes. The associated company codes must all use the same operative chart of accounts.

You assign a company code to a controlling area in Customizing for Enterprise Structure under Assignment → Controlling → Assign company code to controlling area.

Purchasing Organizations

Illustration of purchasing organization linked to company code, info records, contracts, and plants with purchasing groups, showcasing procurement workflow and organizational setup in SAP systems.

A purchasing organization is an organizational unit within logistics that subdivides a company according to the purchasing requirements.

A purchasing organization

Procures materials or services
Negotiates purchase conditions with suppliers

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

If a purchasing organization is to operate across company codes, there is no assignment between company code and purchasing organization. In this case, plants from all company codes can be assigned to the purchasing organization.

However, if a purchasing organization is assigned to a company code, only plants from the assigned company code can be assigned to the purchasing organization. Note that a purchasing organization can only be assigned to one company code. But several purchasing organizations can be assigned to one company code.

You can assign several plants to one purchasing organization and one plant to several purchasing organizations. Unlike the assignment of company code to purchasing organization, the assignment of plant to purchasing organization is mandatory.

When setting up your purchasing organizations, please consider:

Each purchasing organization has its own info records and conditions for price determination.
Each purchasing organization has its own purchasing data and partner roles in the business partner record.
Each purchasing organization evaluates its vendors separately with classic MM Vendor Evaluation.
The purchasing organization is the highest summation level for purchasing statistics after the organizational level Client.
The purchasing organization is a selection criterion for purchasing lists.

Purchasing Organization and Purchasing Group

The purchasers perform the activities of purchasing organizations. A Purchasing Group represents one or more purchasers. A purchasing group is internally responsible for the procurement of a material or certain material groups, and externally, a purchasing group usually represents the contact person for the suppliers.

A purchasing group is not assigned to a purchasing organization or plant. You create the required purchasing groups at client level in Customizing. A purchasing group can be used for all purchasing organizations and plants if authorization management does not stipulate any restrictions. You assign a purchasing group to a material in the purchasing data of the material master record at plant level.

Reference Purchasing Organization

Note

To use the conditions from info records created for the reference purchasing organization, the price determination settings must be extended.

Standard Purchasing Organization

The standard purchasing organization is required for processes where the system has to automatically determine a purchasing organization. These processes are pipeline procurement, consignment, stock transfer and automatic creation of purchase orders when posting goods receipts.

In the source determination process for stock transfers and consignment, the system then automatically uses this standard purchasing organization. In the case of goods issues of consignment and pipeline materials, the purchasing info records of the standard purchasing organization are determined to valuate the posting.

If there is only one purchasing organization assigned to a plant, or you have none of the above mentioned processes, the assignment of a standard purchasing organization to a plant is not necessary. You define the standard purchasing organization for a plant in Customizing for Enterprise Structure under Assignment → Materials Management → Assign standard purchasing organization to plant.

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