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Enterprise Structure in SAP

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Salema Ibrahim

on 20 November 2014

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Transcript of Enterprise Structure in SAP

Enterprise Structure in SAP
Organizational units are responsible for a set of business functions.
They need to be defined and assigned to each other to specify interdependencies.
Portray your organization's structure as an enterprise structure in SAP.
An enterprise structure will consist of organizational units related to FI(Financial Accounting) , SD , MM , CO (Controlling)....
Introduction (Cont.)
Organizational and legal entity in SAP.
Can be a corporate group/enterprise and can represent a company or a union of companies.
Highest organizational unit in SAP
Data separation among different companies in one SAP system.
Data visibility/modification control.
Has its own set of tables and user data.
Objects can be client dependent or client independent.
1. Client
1. Client(cont.)
Some blocks are used to map
this structure to SAP ERP
Organization structure
Business environment
Technical environment
Work environment
client should be defined as the
highest organizational unit in
the customer's organizational
client should be a
representation of a holding
company or group of
in the physical business world.
client defines the boundary of
the master data. Info can only
be accessed inside the client.
Four aspects to be considered when defining a client:
client is the work area that end
users interact with in the
90% of objects are client
ABC Corporation
", has companies:ABC Steel, ABC FMCG, and ABC Pharmacy.
If ABC Corporation wants to implement SAP for all of its companies in a single instance, then it should be represented as a client.
But, if the different companies install SAP individually, then each company will have one SAP instance, and each will represent a client.
1. Client(Cont.)
2. Company
includes all the establishments that operate under the ownership or control of a single organization.
Company in SAP
is the smallest organizational unit for which
legal financial statements(financial reports) can be prepared
according to the legal requirements of the country where it is incorporated
Physical company is different than what company means in SAP
Smallest unit for which you can
create a chart of accounts.
Arranged just below client.
Hierarchically above company code.
May contain one or more company codes, but they must use the same chart of accounts and the same fiscal-year breakdown.
2. Company(Cont.)
3. Company Code
, it represents the organization’s legal entity.
, it is the smallest organizational unit for which a

self-contained set of accounts
can be created.
It will represent legally independent companies.
Using more than one company code allows a customer to manage financial data for different independent companies at the same time.
Must be assigned to:
Credit Control Area
Financial Management Area
Enterprise or corporate group is mapped into SAP as a
, and different companies or subsidiaries of an enterprise are referred to as the
company code
3. Company Code
3. Company Code (Cont.)
A corporate group (client) may have one or more independent companies, each has its own G/L account, balance sheet, and profit and loss (P&L) account.
Then each of these independent business entities needs to be created in SAP as separate company code.
3. Company Code
,all the FI-related business transactions and evaluations are represented at the company-code level.
They are the central organizational units of external accounting in the system
at least one company code must be defined per client to implement FI component in SAP ERP.
Each company code has a general ledger.
4. Plant
, the plant can be any physical location within a company code that is involved in some activity for the company code.
, it is an organizational entity central to the logistics operation.
Can be a production facility, a material stock location, or even a repair facility.
Sample organizational units supplied by SAP are country independent.
Need to reflect legal requirements (taxes, chart of accounts....) and typical business practices of a particular company.
Localization using "
country installation program
, it is a material stock location from where you can source the delivery of goods to your customers.
view,it is a location that holds valuated stock, it's used to procure,store and distribute goods and services.
view,it is an organizational unit that is central to planning production.
4. Plant
Different definitions according to different views:
4. Plant
Assigned to a company code because all
material movements
are carried out in the framework of a plant.
Each material movement that results in a financial transaction requires
posting to accounting
Replicates the selling entity into SAP.
Highest level in the SD enterprise structure to which all the other blocks are assigned.
All sales-related transactions are executed within the framework of a sales organization.
Only create multiple sales organizations when two or more selling entities operate on a totally different basis or when there is a legal requirement to have multiple sales organizations.
6. Sales Organization
Integration Points:
6. Sales Organization
Sales organization and plant are assigned to the company code so that the accounting entries resulting from the sale of goods and services, and those resulting from the material movements in the plant, are posted to accounting.
When creating a customer master or a material master, sales organization must be provided.
A sales organization will be entered while creating a sales order document in SAP.
Integration Points:
Sales organization is assigned to Company code (M:1)
While posting the billing transaction into accounting, SAP ERP uses this assignment to determine the company code to which the accounting posting for sales needs to be booked.
6. Sales Organization
Integration Points:
7. Distribution Channel
Represents the way(or group of ways) that a company uses to distribute goods into the market (to its customers).
Unique way for your customers to obtain goods and services from the company.
At least one distribution channel is needed.
Assigned to one or more sales organization.
So, you set up a small structure that controls the methods of distribution that a sales organization can use to supply goods and services to its customers.
Plant is assigned to the combination of the sales organization and the distribution channel, allowing the sales organization to use the assigned plant in distribution.
If you miss this setting, you will not be able to create an order in SAP.
7. Distribution Channel
Integration Points:
8. Division
Refers to the product division that exists in your organization.
A way to group similar products or product lines in SAP.
Material master record in SAP,is created for a particular division.
Exactly one division is needed for SD to function.
Division is assigned to one or more sales organization.
So, you set up a rule in SAP to control which product divisions a sales organization can and cannot sell from.
An integration point between the MM, PP(production planning), and SD applications.
In SD we use divisions to create a sales area, but determining which product divisions are required to be set up is generally done by MM and PP consultants.
8. Division (Cont.)
Integration Points:
9. Sales Area
Defines the relationship (combines) among selling entity(sales organization), distribution channels and product divisions.
Minimum structure required to process a sales transaction in the SD module.
You cannot create a sales document or enter a customer master record in SD without a sales area.
SAP offers the option to define
common distribution channel
common division.
So, you can define the master data for one distribution channel, and all other distribution channels(belonging to same sales organization) can use the same master data.
7. Distribution Channel
To maintain various sales-related geographical locations of your organization
It can represent a branch office or even a sales territory.
You can use SD without creating sales offices.
10. Sales Office
10. Sales Office
Can be assigned to one or more sales areas.
It can consist of sales groups, usually representing a salesperson or a group of salespeople.
It acts as a selection criteria for sales document maintenance.
Integration Points:
11. Sales Group
Represents the salesperson or a group of salespeople.
This grouping is generally made on the basis of areas of responsibility.
Sales group is assigned to a sales office.
Defining sales group is optional.
Place where stock is physically kept/maintained
within a plant
When goods are received, the stock at the storage location goes up in the quantity received, and when goods are sold, the stock at storage location is reduced according to the quantity delivered.
The lowest level of location definition within the MM functionality.
5. Storage Location
5. Storage Location
Always set up with respect to a plant.
At least one storage location should be defined for a plant.
When WM is implemented=>need to tie WM to MM => assign a warehouse to one or more storage location.
Inventory management on quantity basis is carried out at the storage location level in the plant, as is physical inventory.
It reflects the changes in stock levels and updates the accounting general ledger.
Integration Points:
Organizational entity where deliveries are processed.
Each plant needs at least one shipping point from where deliveries related to that plant can be processed.
Shipping points are assigned to plants (M:M)
12. Shipping Point
13. Loading Points
Subdivision of a shipping point (shipping point can be divided into multiple loading points ==> optional)
They represent structures such as loading dock and can be assigned during delivery process.
Organizational unit that manages transportation-related activities.
Allows planning and execution of shipments
Can represent a physical transportation department responsible for type of shipment, geographical territory responsibility and have its own address.
At least one transportation functionality is needed.
14. Transportation
Planning Point
The shipment documents are assigned to specific transportation planning points.
Assigned to the company code.
M:1 (Transportation planning point to Company code).
14. Transportation
Planning Point(Cont.)
Integration Points:
Financial accounting organizational unit responsible for monitoring, evaluating, and controlling the credit management operations for customer.
To be assigned to the required sales areas and company codes => So you can monitor, evaluate, and control the credit transactions taking place in the assigned company codes and sales areas.
Level at which all of the accounts receivables from a customer are totaled.
15. Credit Control
Can have multiple company codes, but a company code can have only one default credit control area.
If there is a business need for an alternate credit control area instead of the default one ,then the alternate credit control will be configured using “
permitted credit control areas for a company code

15. Credit Control
Permitted Credit Control Area (for a Company Code)
15. Credit Control
3 types of credit management:
Centralized Credit Management
Decentralized Credit Management
Mixed Credit Management .
Used in
functional areas.
Client may contain one or more credit control areas which can be attached to one or more company codes.
Company code can be attached to one credit control area only.
If credit control area is 1:1 with company code=>currency of the credit control area is the same as that of the company code.
If more than 1 company code is assigned to same credit control area => currency of the credit control area may be the local currency of any of the participating company codes or a different currency => receivables are converted into credit control area's currency.
15. Credit Control
Integration Points:
16. Risk Categories
Credit Groups
Grouping customers based on their credit ratings.
Assign the risk category to the appropriate credit control area.
Risk Categories
Specifies which subsequent transaction can be blocked for processing, if the credit limits are exceeded.
Assign all the sales order and delivery document types that you would like to include in credit checks to their respective credit groups.
Credit Groups
Accounting organization unit used in funds management to structure your business organization from the perspective of Cash Budget Management and Funds Management.
In Cash Budget Management, you will work with financial management areas (FM areas) not company codes.
17. Financial Management
17. Financial Management
FM areas are assigned to the company codes where cash budget management is carried out.
One or more company codes can be assigned to a FM area.
The FM area's currency can be different from that of any assigned company codes.
Represents the physical warehouse complex;including collection of all of the racks(shelves),cages and crates(boxes) used to store products.
Physical location that contains defined areas called storage types, which are then further divided into smaller locations called storage bins.
18. Warehouse
18. Warehouse(Cont.)
When WM is implemented in SAP, there is a need to link the WM functionality to MM .
This is achieved by assigning a warehouse to a storage location or number of storage locations.
If a company has WM and MM activated, the goods movements will require knowledge of the major elements of WM.
Integration Points:
An area of the warehouse that is a subsection containing a number of storage bins.
Common storage types in a warehouse include a cold room, bulk storage, and high rack area.
19. Storage Type
20. Storage Section
Subdivision of the storage type, which is simply a group of similar storage bins.
Even if the customer does not want to define storage sections, one storage section must be defined per storage type.
Lowest level of storage available in the warehouse.
21. Storage Bin
22. Purchasing
Important element in the procurement of materials.
Group of purchasing activities associated with all or a specific part of the enterprise ; group for buying raw materials,another in charge of buying computer equipment,another for capital assets....
Purchasing department is mapped as a purchasing organization
Negotiate purchase conditions with vendors for one or more plants, and they are legally responsible for honoring purchasing contracts.
Can be defined on on
three levels
Enterprise Level
Company Level
Plant Level
22. Purchasing
22. Purchasing
One purchasing organization can be defined as a reference purchasing organization ==>
strategic purchasing department
In large companies, the strategic purchasing function analyzes purchasing data and works to negotiate the best prices for materials and services from global vendors.
It can obtain prices and special conditions to be used by purchasing organizations across the enterprise.
Often this reference purchasing organization is not assigned to any company code because it is a function of the whole enterprise.
Reference Purchasing Organization
If purchasing takes place at the
highest level within an organization
=>Central purchasing department
that coordinates purchasing for
all companies within the enterprise.
Purchasing is centralized for each
company. This is appropriate for
customers with companies in various
countries, a purchasing organization
may cover several companies.
In an enterprise that has companies
with large autonomous plants;
the purchasing decisions may be
made at a local level.
If several purchasing organizations procure for a certain plant,one of them can be defined as the standard purchasing organization for the pipeline procurement, consignment(shipment), and stock transfer scenarios.
22. Purchasing
Standard Purchasing Organization
23. Purchasing
Buyer or group of buyers responsible for certain purchasing activities.
Purchasing group isn’t assigned to purchasing organizations or any other organizational units(independent entity).
Defined at the client level and can create purchasing documents for any purchasing organization.
Accounting organizational unit that represents a separate area of operations (or responsibilities) in your business organization.
Used to create B/S (balance sheet) and P/L(profit and loss) statements below the level of a company code.
Helps with segment reporting as it can be defined on products,product lines or geographical areas.
Business-area functionality can be duplicated using profit center accounting. But, the profit centers are areas of internal responsibility for achieving profits or productivity targets.
So, a decision to use or not to use business areas should be made in the design phase.
24. Business Area
24. Business Area(Cont.)
Same business area can be defined across company codes (within the same client) even if the company codes operate with different chart of accounts.
One company code can be divided into multiple business areas and a business area can belong to more than one company code.
Not linked to any other FI organizational units but can be linked to some organizational elements like plants, valuation areas and divisions because single plants usually produce products for one business area.
Can also be linked to sales areas to ensure that revenue postings are made to correct business areas when your sales organizations sell a single grouping of products.
Integration Points:
Account assignment object that can be used to describe financial position and performance by line of business or by geographical area.
Division of a company for which you can create financial statements for external reporting.
Entity/component of entity provides products and services within a particular economic environment(Or business segments) and that is subject to risks and returns that are different from those of components operating in other economic environments.
Can be assigned in profit center master data to derive segment automatically.
25. Segment
26. Functional Area
Used to meet the cost of sales accounting requirements because they enable you to classify the expenses by functions such as administration, sales , marketing and production.
You can separate and classify different types of costs within one expense account.
You could determine what amount of labor spent directly on production as compared to sales and marketing , R&D.........
Can be used in funds management to represent the global targets, goals and expenses of your organization.
Central organizational structure in the controlling component of SAP ERP Financials.
Used to subdivide business organization from the cost-accounting viewpoint.
Like company code, it is a self-contained cost accounting entity useful for internal reporting.
Should be defined before profit centers.
27. Controlling Area
27. Controlling Area
You can have one or more controlling areas in a single client.
Assigned to one or more company codes, CO area ensures that internal business transactions such as primary(direct) costs are transferred from external accounting (FI) and classified according to managerial accounting (CO) perspectives.
SD, MM,and PP have many integration points in CO ==> consumption activities , cost of goods issues, materials cost, production orders,sales orders,billing documents in SD.......
Integration Points:
1:1 (Company Code = Controlling Area) => financial and accounting views are the same.
1:N (Cross-Company Code Controlling) ==> assign more than one company code to the same controlling area. All CO data is collected in one controlling area and internal allocation is used to allocate costs or revenues across the participating company codes, This type can be used for a global organization with several independent subsidiaries using a global managerial accounting.
27. Controlling Area
Integration Points:
Assignment types:
28. Profit Center
29. Funds Management
Level at which you plan the expenditures of one or several company codes.
It controls the budget management.
30. Dunning Area
Manages communications with customers to ensure collection of accounts receivables.
31. Chart Of Accounts
Represents the ledger accounts that will be used to post the sales transaction into accounting.
A company code can have only one chart of accounts.
Illustrative Example

22. Purchasing
Business Scenarios
15. Credit Control
FI Components
What is enterprise structure.
Difference between enterprise structure and organization structure.

Areas of internal responsibility for achieving profits or productivity targets.
Reflects a management-oriented structure of your company for internal control.
Can be modeled based on functional divisions , geographical divisions , product lines or similar factors.
SAP Enterprise Structure
Common SAP Enterprise Structure
Advanced SAP Enterprise Structure
Deep into SD
Deep into FI
Integrated SAP Enterprise Structure - Graphical Representation
Full transcript