Identifying the Organizational Structures

Objectives

After completing this lesson, you will be able to:

  • Identify organizational structures

Relevant Organizational Structures in SAP Retail

The Internet Demonstration and Evaluation System (IDES) of SAP enables you to carry out retail-specific processes. New retail structures, master data and Customizing settings have been created especially for IDES to complement the existing industry-relevant organizational structures.

Organizational Structures are used to do the following:

  • Map the individual parts of a company (for example, Purchasing and 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.

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. To connect Financial Accounting and Controlling, company codes are assigned to controlling areas.

The controlling 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.

A purchasing organization procures merchandise for several stores and negotiates purchase conditions with vendors. This is the business unit legally responsible for all purchasing activities and acts as a data retention level for master data. The purchasing organization serves as a key field in purchasing-related master data and in business documents, such as a purchase order.

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. A purchasing group is no data retention level.

A purchasing area can optionally be used to connect a purchasing organization and one or more purchasing groups for reporting purposes. This is indicated in the previous figure, Organizational Structures in Purchasing, by the lines between the purchasing organizations and purchasing groups. In any case, reporting is possible on purchasing organization and purchasing group level.

Article stocks are managed on a quantity basis in the system to keep track of the merchandise flow in the company. Stocks are managed for each individual site and storage location.

A site can be a store, a distribution center, or a production location.

A storage location is a stock-keeping unit with its own inventory management. The stocks located in a site can be managed separately in different storage locations.

A distribution center (DC) 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 DC 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).

A store is usually assigned one storage location.

A distribution chain is a combination of a sales organization and a distribution channel.

A sales organization is legally responsible for sales in your company and is therefore responsible for product liability and any recourse claims from customers. Sales organizations allow you to divide your market into regions. Business transactions in sales and distribution are always processed in a sales organization.

In order to best serve the market, your sales and distribution department uses different distribution channels. Possible distribution channels include sales to the consumer through store chains, wholesale outlets, or by mail order. Distribution channels are assigned to sales organizations to form distribution chains.

In order to connect the SD (sales and distribution) and FI (financial accounting) modules/systems, the sales organization is assigned to exactly one company code.

Divisions are not operationally used as organizational levels in SAP Retail. However, as the division is used as a key field in some tables of the SD module, one dummy division is maintained in SAP Retail. In our example, the corresponding default (dummy) value used is R1. In the SD module, the combination of a sales organization, a distribution channel, and division is called sales area.

In SAP Retail, some of the organizational elements are considered strategic elements. This is because they have to be defined in customizing before master data can be created, as these elements have to be assigned there. For example, the company code is a mandatory assignment in a site master, and a key field in the accounting views of the customer and vendor business partners. In addition, the purchasing organization as a strategic organizational element has to be assigned for example to the vendor master, to maintain the purchasing data, and it serves as a data retention level (key field) for purchasing-related conditions, and purchasing info records. In contrast, the purchasing group for example is an operational element.

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