Preface – This post is part of the SAP MM series.
Table of Contents
In the SAP ERP, SAP MM Organizational Structure is used to represent the legal and organizational structure of the company. The organizational structures form a framework according to which the whole business runs.
The organizational structure in Material management consists of the following levels:
- Company Code
- Storage location
- Purchasing Organization
- Purchasing Group
The following diagram represents the organizational structure of SAP MM:
Let’s discuss them briefly.
A client is a group or combination of legal, organizational, business and/or administrative units with a common purpose. It is the highest hierarchy of the organizational structure in SAP.
A company code represents an independent unit within a client. This organizational unit is created in finance and the same is linked with the Materials Management module. Each company code maintains its own balance sheet and its own profit and loss statement.
A plant is an operational unit in a company code. In SAP, the plant is a broad term depending on the functionality. As in Material management, it is referred to as a facility where materials are stored, and inventory is maintained. Whereas in the Production planning module, it is referred to as a facility where materials are produced.
A storage location is an organizational unit where stocks are kept physically, and inventory is maintained. A plant can consist of multiple storage location which differentiates between different materials are stocked in a plant.
A purchasing organization is an organizational unit responsible for procuring materials/services for one or more plants. It is responsible for negotiating general conditions of purchase with vendors and holds legal responsibility for all external purchase transactions.
Purchasing organizations can be centralized or decentralized. In centralized, a single purchasing organization is assigned to one or more plant whereas in decentralized, different purchasing organization is assigned to a different plant.
A purchasing group is an organizational unit responsible for day-to-day procurement activities in an organization. It may be an individual or group of individuals responsible for carrying out procurement activities.