Explain the Organizational Structures


After completing this lesson, you will be able to:

  • Explain the organizational structures

Organizational Structures

As a long-term SAP user, you want to some insight into the use of the organizational structures in SAP S/4HANA, and the areas in which we use organizational structure.

The enterprise structure of a company is mapped to SAP applications using organizational units.

Organizational units represent the enterprise structure in terms of legal or business-related purposes.

Organizational units include legal company entities, plants, storage locations, sales offices, and profit centers.

The following are examples of organizational levels:

  • Client is the highest-level unit of all organizational elements. It represents the enterprise or headquarters group.

  • Company code is a unit used in the balance sheet of a legally independent enterprise. It is the central organizational element of Financial Accounting (FI).

  • Sales organization is the central organizational element of Sales and Distribution that controls the terms of sale to the customer. A division is usually used to represent a product line.

  • Plant is the central organizational unit in the context of production planning. A plant can manufacture product, distribute product, or provide a service.

Material stocks can be differentiated within one plant according to the storage location in the context of inventory management.

Organizational units may be assigned to a single application or to several applications. For example, a sales organization is assigned to Sales and Distribution, while a plant is assigned to materials management, production planning, and sales.

Master data is created and assigned to organizational structures at various levels.

Enterprise Structure – Financials and Logistics

A controlling (CO) area is the basic organizational unit in Management Accounting. It is a closed entity that is used for cost accounting. You can allocate costs only within a CO area. These allocations do not affect objects in other CO areas.

An operating concern is the central organizational unit in Profitability Analysis (CO-PA). It represents the structure of external market segments for the enterprise. You can assign several CO areas to each operating concern so you can analyze them together.

A company code is an independent accounting unit. You prepare financial and profit and loss (P&L) statements at the company code level to meet legal reporting requirements. You can use business areas (BAs) to group strategic business units for reporting financial and P&L statements. BAs are not suitable for auditing; they are only suitable for reporting purposes. BAs can also group business units that are associated with different company codes.

In logistics, a plant is an organizational unit for categorizing an enterprise according to production, procurement, maintenance, and materials planning. A plant is a place where materials are produced, or goods and services are provided. A plant is assigned to a company code.

A purchasing organization is an organizational unit used in MM – purchasing.

A sales organization is an organizational unit that is used in sales order management.

Purchasing Organization

The purchasing organization is an organizational unit within logistics that subdivides the enterprise according to the purchasing requirements.

The purchasing organization is responsible for procuring materials or services and negotiating the conditions of purchase with vendors, and assumes responsibility for the purchasing activities.

Purchasing Group

A purchasing group is a key to represent 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 supplies the contact person for vendors. The purchasing group is not assigned to other units in the company structure.


The plant is an organizational unit within logistics that subdivides an enterprise into production, procurement, and materials planning. The system defines a plant in the client using a four-character alphanumeric key.

A plant can represent a variety of entities, including the following:

  • The production facility

  • The central issuing storage location

  • The regional sales office

  • The corporate headquarters

  • The maintenance location

Storage Location

The storage location is an organizational unit that facilitates the differentiation of stocks of materials in a plant. Inventory management is carried out in the plant at the storage location level.

The system defines a storage location using a four-character alphanumeric key. Each storage location has a unique key.

Enterprise Structure in Manufacturing Execution

Enterprise Structure in Sales and Distribution

Organizational levels represent the structure of an enterprise organization. They also represent the legal and organizational views of an enterprise. The order-to-cash process is part of the Sales and Distribution (SD) application component.

A sales and distribution component module includes organizational levels that are unique to the sales and distribution processes, such as sales organization, distribution channel, division, and shipping point. It also includes organizational levels, such as company code or plant, which are used in SD and in other modules.

You can represent your enterprise structure using organizational levels based on your business processes.

Enterprise Structures in SAP ERP Human Capital Management (HCM)

Display the Organizational Structures

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