Identifying Organizational Units for Supply Chain

In the following section, the plant, storage location, and shipping point are introduced as key organizational units essential to Supply Chain processes.

The plant is the central organizational unit in supply chain.

Plants are configured within the system to segment a company for logistical processes.

A plant is responsible for producing materials or providing goods and services. It is an operating unit or a subsidiary of an enterprise.

The plant serves as the central organizational unit for processes in manufacturing, supply chain management, sales, and procurement.

You must specify a plant in every sales order item, purchase order item, production order item, and for every goods movement posting. Most logistics master data covered in this course, within the respective scenarios, are maintained in relation to a plant. This includes materials, bills of material, and optionally, purchasing info records.

A material can be maintained with different data for each plant. This is true, for example, for purchasing, MRP data, and stock valuation data. Since a material master record contains substantial data that controls processes, logistical processes for a material can vary by plant.

For example, you can maintain a different goods receipt processing time in each plant for a material. This is the number of working days needed for inspection and storage after the material has been received. The goods receipt processing time is part of the replenishment lead time of a material. Choosing different goods receipt processing times in the material master record for different plants affects the replenishment lead time in the respective plant.

Apart from defining the goods receipt processing time, you can also define the material requirements planning (MRP) parameters, such as MRP types, for each plant. Therefore, the planning method for a material may differ in each plant. For instance, in a production plant where the material is used as a component, it can be planned consumption-based, whereas in a distribution plant where the material is sold as a spare part, it can be demand-based.

The storage location enables the separation of material stock quantities within a plant.

If Warehouse Management is not used, quantity-based inventory management and physical inventory are executed at the storage location level within the plant. The storage location is the smallest organizational unit in Inventory Management where stock quantities can be managed.

Within the storage location, stock quantity can be differentiated by stock type. The stock type is a logical differentiation of stock quantities, not a physical one, and it determines the usability of a material quantity.

For example, withdrawals for cost centers or deliveries to customers can only be made from unrestricted-use stock. The stock type is specified either by the user or by default for each material movement.

The enterprise structure is established by assigning organizational levels to each other. A client can contain multiple company codes, and each company code can include several plants. However, a plant can only belong to one company code.

Similarly, multiple storage locations can be assigned to a plant, but each storage location can only belong to one plant.

A shipping point is an organizational unit that indicates where goods are dispatched from. Outbound deliveries and associated goods issues are processed and monitored at a shipping point in the system. Each outbound delivery is handled at a single shipping point, which is included in the delivery and passed on from the sales order or stock transport order.

A shipping point can also serve as a goods receiving point for inbound deliveries. For simplicity, we refer to these units as 'shipping points' in this lesson.

In configuring the enterprise structure, you define the combinations of shipping points and plants.

You can configure your enterprise structure to assign multiple shipping points to a single plant, as well as multiple plants to a single shipping point. This flexibility allows for efficient handling of various logistical needs.

• Multiple shipping points to one plant

  In a large manufacturing plant, you might have several loading docks, each designated as a separate shipping point. This setup can help manage different types of shipments, such as small parcels, large freight, and international deliveries, all from the same plant.

• Multiple plants per shipping point

  If you have two nearby plants, they can share a single central shipping point. This central shipping point would handle outbound deliveries for both plants, streamlining the dispatch process and reducing redundancy.

In the following video, join Julia, the SAP consultant, and Paul, the customer's supply chain manager, as they discuss how best to define plants in an SAP S/4HANA Cloud system, tailored to their specific project context.

The previous video provided an example of important questions to consider when defining plants during an SAP S/4HANA Cloud implementation.

An important consideration when mapping your company’s warehouses in the system is whether or not to implement warehouse management.

Without warehouse management, storage locations act as the organizational units that separate stock quantities within a plant. In this setup, inventory management is carried out at the storage location level, based on quantities. Physical inventory is also conducted at this level.

Without warehouse management, the storage location is the smallest organizational unit where stock quantities can be tracked and managed.

This simplified approach is generally recommended in the following scenarios:

• Smaller warehouses with a relatively simple layout
• Streamlined material handling processes
• Warehousing operations that are outsourced

In more complex and larger warehouses, or when stock needs to be managed at the bin level, it is recommended to use warehouse management.