Unit 3: Organizational Units

Lesson 1 · Defining Organizational Units in Materials Management

Key concepts

Accounting units MM cannot live without

Even if the general ledger is kept in a non-SAP system, S/4HANA requires the financial organizational units, because every valuated goods movement and every invoice produces an accounting document. Each legally independent company is a company code — the smallest unit for which a complete, self-contained set of books (balance sheet, P&L) can be produced.

• Business area: optional unit for internal reporting by line of business or area of responsibility; a plant (with a division) maps to exactly one business area.
• Controlling area: unit for self-contained cost accounting. It may span several company codes, provided they use the same operative chart of accounts.

Purchasing organization

The purchasing organization is the logistics unit that procures materials and services and negotiates conditions with suppliers; it is legally responsible for purchasing transactions. It is embedded in the structure by two assignments:

If the purchasing org is assigned to a company code, it may only serve plants of that company code. If it is not assigned (centralized, cross-company-code purchasing), plants of any company code can be assigned; the company code of the PO is then derived from the plant.

Consequences of the purchasing org design:

• Each purchasing org has its own purchasing info records and conditions for price determination.
• Supplier purchasing data and partner roles in the business partner are maintained per purchasing org.
• Classic vendor evaluation is carried out per purchasing org.
• After the client, the purchasing org is the highest aggregation level of purchasing statistics, and it is a selection criterion in purchasing reports.

Purchasing group

A purchasing group is a buyer or group of buyers — internally responsible for certain materials or material groups, externally the contact person for suppliers. It is defined at client level and is not assigned to a purchasing org or plant; any group can be used with any purchasing org unless authorizations restrict it. It is entered in the material master on the Purchasing view (plant level) and is a key field for analyses, authorization checks and output.

Reference purchasing organization

To pool volume across purchasing orgs, a reference purchasing organization negotiates centrally. Other purchasing orgs assigned to it can use its contracts (release orders against central contracts) and its conditions for price determination. The reference purchasing org is technically a normal purchasing org, so the supplier's purchasing data in the business partner must also be maintained for it. To use the reference org's info record conditions in pricing, the price determination settings (condition access/schema) have to be extended.

Standard purchasing organization

Some processes need the system to find a purchasing org without user input: pipeline and consignment withdrawals (valuation from the standard purchasing org's info records), stock transfers (source determination) and the automatic creation of POs at goods receipt. For these, a standard purchasing org is assigned to the plant. If only one purchasing org serves a plant, or none of these processes is used, the assignment is not required. Subcontracting and third-party processes do not need it.

Process flow

System steps

1. Define/copy the company code (OX02) and maintain global parameters including the chart of accounts (OBY6, or assign via OB62).
2. Define business areas (OX03) and the controlling area (OKKP); assign the company code to the controlling area (OX19).
3. Define purchasing organizations (OX08), optionally assign them to a company code (OX01) and assign them to plants (OX17).
4. Create purchasing groups (OME4).
5. Assign purchasing orgs to a reference purchasing org and a standard purchasing org to each plant in the IMG (paths below).

Configuration (IMG)

Lesson 2 · Defining and Assigning Plants

Key concepts

Valuation area and valuation level

The valuation area is the unit at which material stock is valuated. The valuation level (plant or company code) is chosen once for the entire client (OX14):

In a productive system the valuation level cannot be switched. Value-based inventory management always happens at valuation area level. Within a valuation area, stock of one material can additionally be split into partial stocks with different prices (split valuation via valuation category and valuation types — see Unit 5).

Plant

A plant subdivides the enterprise for production, procurement, maintenance and planning. Its characteristics:

• Belongs to exactly one company code (a company code can have many plants).
• Plant + division map to exactly one business area.
• Can be assigned to several sales organization/distribution channel combinations and to several shipping points (and a shipping point to several plants).
• Has an address, language, country and region, and a factory calendar.
• Has its own plant-level material master data (MRP, Purchasing, Storage, Work Scheduling, PRT, Forecasting, QM, Sales, Costing views).
• Can be served by several purchasing organizations.
• Is the level for value-based stock management if valuation level = plant, and the level for MRP and production; costing and some planning functions can work cross-plant.
• Can also be a maintenance planning plant (Enterprise Structure › Definition › Plant Maintenance), at the same time as being a production plant.

Storage location

• The level at which stock is physically kept and managed by quantity only (never by value).
• The level at which physical inventory is carried out (unless warehouse management takes over).
• Always belongs to one plant; the key is unique only within the plant, so the same key (e.g. 0001) can be reused in every plant to create a uniform structure.
• Can have one or more addresses differing from the plant address. If a storage location address exists and the storage location is in the PO, that address is printed as delivery address; with several addresses the first is proposed and can be changed on the Delivery Address tab.

Organizational levels in logistics

Creating a new plant

Instead of creating a plant entry only in table T001W, use Define, copy, delete, check plant (EC02). Copying from a reference plant creates the plant entry and all entries in dependent Customizing and system tables that have the plant as key (inventory management plant parameters, valuation-area-dependent material type settings, MRP parameters, etc.). The same copy/delete/check tools exist for company codes and sales organizations. EC02 › Extras › Associated Tables lists all plant-dependent tables.

The tool offers four functions: copy, delete, check and generating a project view. Via the IMG button, a view containing all Customizing activities with plant-specific settings is generated and must be attached to an existing Customizing project — a handy checklist for completing the new plant.

The check runs in two steps: first it verifies that the plant exists in every table whose key contains the plant; second it verifies that the dependent values referenced in those entries exist (e.g. that the material types listed for the valuation area of the plant still exist in the material type table).

The plant definition itself contains key, name, country, region, language, factory calendar and the address (maintained through the central address management with search terms).

Material Ledger

In SAP S/4HANA the Material Ledger is mandatory. It collects transaction data for materials, enables inventory valuation in several currencies/valuations, and can be used for actual costing. After creating a plant, verify that the Material Ledger is active for the new valuation area (OMX1) and set the valuation area to productive (CKMSTART).

Process flow

System steps

1. Run EC02 › Copy, delete, check plant: copy the reference plant to the new key.
2. In Define plant (OX10), change name, address (search terms), language, country/region and factory calendar.
3. Assign the plant to the company code (OX18) and to the purchasing org(s) (OX17); set a standard purchasing org if needed.
4. Define or adjust storage locations and their addresses (OX09).
5. Run the check function in EC02 and generate the plant project view to work through remaining plant-specific activities.
6. Activate the Material Ledger for the valuation area (OMX1) and set it productive (CKMSTART).

Configuration (IMG)

Unit summary & exam focus

MM requires the accounting units (company code, controlling area), the purchasing units (purchasing organization, purchasing group) and the logistics units (valuation area, plant, storage location). The key exam topics are the assignment rules, which data is stored at which level, the special purchasing organizations (reference and standard), and the procedure for creating a new plant including Material Ledger activation.

T-codes in this unit

Self-check questions

1. True or false: a purchasing organization must always be assigned to a company code.
   Answer

   False. A central (cross-company-code) purchasing org has no company code; it can then serve plants of several company codes.
2. Which assignment is mandatory before you can create a PO?
   Answer

   Purchasing organization to plant.
3. For which processes do you need a standard purchasing organization?
   Answer

   Consignment and pipeline (plus stock transfers and automatic PO creation at GR). Not subcontracting or third-party.
4. On which level are purchasing groups defined?
   Answer

   Client level; they are not assigned to any organizational unit.
5. Can storage location key 0001 be used in several plants?
   Answer

   Yes, storage locations are defined per plant, so the key only needs to be unique within a plant.
6. Which levels can be chosen as the valuation level?
   Answer

   Plant or company code (client-wide decision; SAP recommends plant).
7. What does EC02 do beyond creating the plant entry?
   Answer

   It copies/deletes/checks all dependent tables with the plant as key and can generate a project view with all plant-specific Customizing activities.
8. What must you do with the Material Ledger after creating a new plant?
   Answer

   Activate it for the new valuation area (OMX1) and set the valuation area as productive (CKMSTART).