Every company or organization has its structure according to which it runs its business. An organization structure in SAP MM is the structure that represents an enterprise in the SAP ERP system.

Table of Contents

What is Organization Structure?

Organization structure also known as enterprise structure, client structure is further divided into different levels which are

Company Code
Plant
Storage Location
Purchasing Organization & Types
Purchasing Group

all these levels are used to design the structure of a company and are responsible for procurement.

Let’s discuss about each of the following

Let us discuss first about Company, What is a Company?

A company may be a business, service or a membership organization; it may consist of several establishments and operate at one or several locations.

Company Code:

A company code is the smallest organizational unit of external accounting within the SAP system. Basically company code is the subsidiary of a company. We can use one or many company codes.

Here Reliance is the company and its subsidiaries Jio, Retail, Petroleum are the company codes.

E.g. Manufacturing, Procurement, Sale office.

Plant:

It is a physical location. It can be any location within the company code. It can be easily defined based on the business requirement.

E.g. Manufacturing, Procurement, Sale office.

Storage Location:

It is a location where the stock is stored within the plant. We maintain the storage location on a quantity basis.

E.g. I have ordered 100 pieces of material and the vendor supplies these 100 pieces to the company and the company does a good receipt for that and then these are stored in the storage location.

There can be different storage locations depending upon the type of the business.

Purchasing Organization:

Organization that is responsible for requirement & procurement activities. Purchasing organization negotiates the condition of purchase with the vendor. It can be responsible for one or more plants.

Types of Purchasing Organization

Normal Purchasing Organization:

It is further divided into two parts i.e. Centralized and Decentralized purchasing organization.

Centralized Purchasing :

When a company code has more than one plan but has a common purchasing organization then it is known as a centralized purchasing system.

One Purchasing Organization responsible for multiple plant. Cross- plant purchasing

Decentralized Purchasing :

When a company code has more than one plant and each plant has its own purchasing organization then it is known as a decentralized purchasing organization.

Plant Specific organization.

Reference Purchasing Organization:

When a company code has more than one plant and has a separate purchasing organization for each of its plants so in order to save time for negotiations they build a reference purchasing organization which shares a global contract.

Standard Purchasing Organization:

If the plant is having more than one purchasing organization then we use one of the purchasing organizations as the standard organization which is used for special procurement.

Purchasing Group:

The purchasing group can be defined as the person or group of people dealing with certain material or group of materials purchased through a purchasing organization. (mainly used for reporting purposes.)

Points to Remember

One Company Code can have multiple plant.
One or more storage locations may exist within a plant.
Two plants can not have a common storage location.
One company code can have multiple purchasing organizations but one purchasing organization can have one company code.
One purchasing org. can procure for several plants.

Organization Structure in SAP MM