SAP Hierarchy Overview

SAP Hierarchy – Webinar
30th June, 2007
© 23-Sep-19 IBM Corporation

IBM Express Services for SAP
Agenda
 07:15 - 07:25 SAP Hierarchy – Objectives (Srinivas Rao)
 07:25 - 08:10 SAP Finance and Controlling Org Hierarchy Overview (Srinivas Rao)
 08:10 - 08:20 Q&A
 08:20 - 08:50 Sales and Distribution Org Hierarchy Overview (Rosalyn Haley)
 08:50 - 09:00 Q&A
 09:00 - 09:10 Break
 09:10 - 09:40 Warehouse Management/Plan to Make Org. Hierarchy Overview (Jeff / Suresh)
 09:40 – 09:50 Q&A
 09:50 - 10:15 Materials Management Org Hierarchy Overview (Jeff Brekke)
 10:15 – 10:30 Q&A and WrapUp
Pacific Time
2 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Organizational Hierarchy
The organizational hierarchy used within SAP is very important …
 It is the fundamental data and functional architecture within the SAP

system
 It is comprised of customizable organizational entities
 It is central to the operation of the software
 It is a prerequisite to configuration
 It facilitates common business processes and master data
standards
 It drives operational and management reporting

SAP Data Structure
Examples:
Company Code
The fundamental data
Plant
framework within the SAP Org
system
Structure
SAP
GL Accounts
SAP’s static Client Cost Elements

Cost Centers
informational and
Profit Centers
processing parameter
Master Data
GL entries
Cost Allocation
On-line tasks which Invoices
combine to form Goods Receipt
integrated business
processes
Transactions

SAP Hierarchy
The SAP hierarchy is the “backbone” of the

SAP system and is “linked” to every
transaction and master data element in the
SAP system.
The result is that the SAP Hierarchy provides

the translation of the:
• Organization Structure
• Reporting Requirements
• Business Process Environment

Our Ultimate Goal …

 Multi-dimensional …
… Reporting

Representative View of the SAP Hierarchy

Operating Concern
Chart of Accounts
Controlling Area
Company Code Company Code

Purchasing
Organization Profit
Center
Purch Group
Plant
Purch Group
Sales Area Cost Cost

Sales
Organization Center Center
Distribution
Channel
Division Storage Location
Storage Location Warehouse
Key: Financial Procure to Pay Order to Cash Supply Chain(P2M,WM&L)
Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Hierarchy Elements

by Process Areas


Finance

SAP Hierarchy Definitions - Finance
Hierarchy Element
Company Code
Chart of Accounts
Operating Concern
Controlling Area
Profit Centers/Hierarchy
Cost Centers/Hierarchy

Company Code
Definition:
The company code is a smallest organizational
unit of external accounting for which a complete,
self-contained set of accounts can be created.
This includes the entry of all transactions that
must be posted and the creation of all items for
legal individual financial statements, such as the
balance sheet and the profit and loss statement. Use:
 SAP recommends to use a
company code for each legally
Operating Concern
Operating Concern
independent entity
Chart
 A company code can also be
ChartofofAccounts
Accounts
Controlling
ControllingArea
Area used representing an
organization below legal entity,
Company
CompanyCode
Code Company
CompanyCode
Code Purchasing
e.g. to enable a complete set of
Purchasing Profit
Organization
Organization Profit
Center
books for a division
Center
Purch
 A company code can represent
Plant PurchGroup
Group
Plant Purch
PurchGroup
Group an operation that is not
independent according to trade
Sales Area
Sales Cost Cost law, but located in another
Sales Cost Cost
Organization
Organization
Center
Center
Center
Center country and must use the
country currency and meet the
Distribution
Distribution
Channel
local tax requirements.
Channel
Storage
Division
Division StorageLocation
Location
Storage Warehouse
StorageLocation
Location Warehouse
Chart of Accounts (COA)
Definition:
The chart of accounts is an organisational structure, defined along accounting principles, that records
values and value flows for orderly account management. This is a list of all G/L accounts used by one or
several legal entities.
Operating Concern Use:

Operating Concern
Chart of Accounts
Chart of Accounts
Controlling Area
Controlling Area
 Each legal entity must be linked to
a chart of accounts that is used
for daily postings and called
Company Code Company Code operating COA
Company Code Company Code Purchasing
Purchasing Profit
Organization Profit
Organization Center
Center
 An operating COA can be linked
Purch Group
Plant Purch Group to many legal entities
Plant Purch Group
Purch Group
 In addition, you may assign each

Sales Area Cost Cost legal entity to a country-specific
Sales Cost Cost
Sales Center Center
Organization Center Center chart of accounts
Organization
Distribution
Distribution  The global chart of accounts and
Channel country-specific chart of accounts
Channel
are linked using alternating
Division Storage Location account numbers


Operating Concern
Definition:
Operating concern represents a part of organization for which a sales market is structured in a uniform
manner.
Operating concern is structured by market segments that are defined as combinations of classifying
characteristics (such as product group, customer group, country, or distribution channel). It represents
the environment within which a market segment can be monitored and profitability analyzed.
Operating Concern
Operating Concern
Use:
Chart
ChartofofAccounts
Accounts
Controlling Area  Since the operating concern
Controlling Area
reflects the structure of your sales
market, one operating concern
Company
CompanyCode
Code Company
CompanyCode
Code Purchasing should normally be sufficient for
Purchasing Profit
Organization
Organization Profit
Center
Center your entire organization
Plant
Purch Group
Purch Group  Several operating concerns could
Plant Purch
PurchGroup
Group be used if there are enterprise
areas that require a profitability
Sales Area
Sales
Sales
Cost
Cost Cost
Cost analysis based on a very specific
Organization Center
Center Center
Center
Organization market segmentation
Distribution
Distribution
Channel
Channel

Storage Warehouse
StorageLocation
Location Warehouse

Controlling Area
Definition:
The highest Controlling level for which the management and reporting of costs and profit can be
performed. The controlling area is an organisational unit that represents a system used for cost
accounting purposes.
Operating
OperatingConcern
Concern Use:
Chart  A controlling area may be assigned
ChartofofAccounts
Accounts Controlling Area
Controlling Area to one or multiple company codes,
which can operate in different
currencies, if required
Company
CompanyCode
Company
Code CompanyCode
Code Purchasing  All cost-accounting relevant data is
Purchasing Profit
Organization Profit
Organization Center collected in one controlling area and
Center
Purch can be used for allocations and
Plant PurchGroup
Group
Plant Purch
PurchGroup
Group
evaluations
 Controlling area assigned to multiple
company codes allows cross-
Sales
Sales Cost Cost company code cost accounting and
Organization Center Center allocations
 The company codes within a
Distribution
Distribution controlling area must all use the
Channel same operating chart of accounts.
Channel
Division Storage
StorageLocation
Location
Division
Warehouse
Storage Location

Cost Centers
Definition:
Organizational unit within a controlling area that represents a clearly delimited location where costs
occur. You can make organizational divisions on the basis of functional, settlement-related, activity-
related, and/or responsibility-related standpoints.
Operating
OperatingConcern
Concern
Use:
Chart
ChartofofAccounts
Accounts  A Cost Center is a departmental
Controlling
ControllingArea
Area breakdown of a legal entity to
which costs are charged or
Company allocated.
CompanyCode
Company
Code CompanyCode
Code Purchasing
Purchasing
Organization Profit
Profit
 Cost Centers monitor costs and
Organization Center reflect the areas of responsibility
Center
Purch of an organization.
Plant PurchGroup
Group
Plant Purch
PurchGroup
Group  Each Cost Center is assigned to
a Controlling Area.
 Each cost center is assigned to a
Sales
Sales Cost Cost cost center group in the standard
Organization Center Center hierarchy
Distribution
Distribution
Channel
Channel
Storage
Division
Division StorageLocation
Location
Storage Warehouse
StorageLocation
Location Warehouse
Profit Centers
Definition:
A profit center is an organizational unit in accounting that reflects a management-oriented structure of
the organization for the purpose of internal control.
It represents a region, function or product where costs and revenues are collected. All objects with profit
related data should be assigned to a profit center including cost centers, sales order line items, assets,
etc. The profit center must be assigned to a hierarchy for roll up analysis.
Operating Concern
Operating Concern
Use:
Chart
ChartofofAccounts
Accounts
Controlling Area
 When you carry out profitability
Controlling Area
analysis for a profit center you can
include costs from several cost
Company
CompanyCode Company
CompanyCode
Code Code Purchasing
Purchasing Profit centers.
Organization Profit
Organization Center
Center  Cost and revenues can be rolled
Plant
Purch Group
Purch Group up to higher levels of the profit
Plant Purch
PurchGroup
Group center hierarchy
 Every profit center is assigned to
Sales Area Cost Cost a controlling area.
Sales Cost Cost
Sales Center Center
Organization
Organization Center Center  Each material is assigned to
exactly one profit center per plant.
Distribution
Distribution
Channel
Channel

Storage Warehouse
StorageLocation
Location Warehouse

Profit Center Assignments

 An object’s assignment to a profit center is stored in that object’s master
record.
 The system automatically transfers the data to Profit Center Accounting
when it is posted to the original object.
Cost Center
Internal Order Profit Project WBS

Element
Center
Material Asset

Questions & Answers


Lead to Cash

SAP Hierarchy Definitions – Lead to Cash
Hierarchy Element
Sales Organization
Distribution Channel
Division

Sales Area
Definition:
The Sales Area is a combination of Sales Organization, Distribution Channel and Division. Sales Area is
the level where all sales-relevant data is defined, where documents are processed and where sales
figures can be analyzed
Operating Concern
Chart of Accounts
Chart of Accounts
Controlling Area
Controlling Area  The Sales Area is linked to only one
Company Code (through the Sales
Company Code Company Code Organization) but one Company
Purchasing
Organization Profit
Profit
Code can have multiple Sales Areas
Organization Center
Center
Plant
Purch Group
Purch Group  Sales analysis may be based on
Plant Purch Group
Purch Group Sales Area
Sales Area
Sales Cost Cost  Sales Area is used to determine
Sales Cost Cost
Organization Center
Center Center
Center
pricing procedure
Organization
Distribution  Sales document types are

Distribution
Channel
Channel associated with Sales Areas



Sales Organization
Definition:
The Sales organization is the unit responsible for the sale of products or service. Sales Organization
represents a selling unit in the legal sense and is responsible for product liability and other recourse
claims made by customers. Sales Organization could also be used for regional sub-dividing of the
market
Sales Organization is the highest summation level for sales
Operating Concern
Operating Concern
Chart
ChartofofAccounts
Accounts Use:
Controlling Area
Controlling Area
Company
 A Sales Organization is attached
CompanyCode
Code Company
CompanyCode
Code Purchasing
Purchasing
Organization Profit
Profit
to only one Company Code; a
Organization Center
Center Company Code can have multiple
Purch Group Sales Organizations
Plant Purch Group
Plant Purch
PurchGroup
Group
 Complexity and maintenance

Sales Cost Cost
Sales Center Center
Organization
 Sales Organization is one of the
Distribution
key elements in pricing
Distribution
Channel
Channel

Storage Warehouse
StorageLocation
Location Warehouse

Distribution Channel
Definition:
The Distribution Channel is the way products and services reach customers. Within a Sales
Organization, goods can be delivered to a given customer through more than one Distribution Channel.
Operating Concern
Operating Concern
Use:
Chart of Accounts
Chart of Accounts
Controlling Area
Controlling Area
 A Distribution Channel can be
attached to multiple Sales
Purchasing Profit
Organizations
Organization Profit
Organization Center
Center
Purch Group  A Sales Organization can have
Plant Purch Group
Plant Purch Group
Purch Group multiple Distribution Channels
associated to it
Sales
Sales Cost
Center
Cost
Center
 Each business transaction in sales
Organization is processed for a particular
Distribution Channel, as specified
Distribution
Distribution
Channel by the Sales Area for the
Channel
transaction


Division
Definition:
A Division is a grouping of materials, products or services for reporting and accounting purposes.
Division is designated on the material master
Operating
OperatingConcern
Concern Use:
Chart
ChartofofAccounts
Accounts
Controlling  A Division can be attached to
ControllingArea
Area
multiple Sales Organizations and
a Sales Organization can have
Company
CompanyCode
Code Company
CompanyCode
Code multiple Divisions associated to it
Purchasing
Purchasing Profit
Organization
Organization Profit
Center
Center  Each business transaction in
Purch
PurchGroup
Plant
Plant Purch
Group sales is processed for a particular
PurchGroup
Group Division, as specified by the
Sales Area for the transaction
Sales
Sales Cost Cost
Organization Center
Center
Center
Center  Since Division appears at the
Organization
item level on a transaction, a
Distribution sales order with products from
Distribution
Channel
Channel
multiple Divisions is possible
Division Storage
StorageLocation
Location
Division
Storage Warehouse
StorageLocation
Location Warehouse

Questions & Answers


Warehouse Mgmt. / Plan to Make

SAP Hierarchy Definitions – Warehouse Mgmt./ Plan to Make
Hierarchy Element
Plant
Storage Location
Warehouse

Plant
Definition:
Plant is a manufacturing facility, warehouse, or a location that stocks, manages, and valuates inventory.
Operating
OperatingConcern
Concern
Use:
Chart
ChartofofAccounts
Accounts
Controlling
ControllingArea
Area
 At plant level functions such as
inventory valuation, production,
Company
CompanyCode
Code Company
CompanyCode
Code product costing, availability check
Purchasing
Purchasing Profit
Organization
Organization Profit and MRP are carried out
Center
Center
Purch
PurchGroup
Plant
Plant Purch
Group
PurchGroup
Group
 A plant is assigned to exactly one
company code
Sales
Sales Cost
Center
Cost
Center
 A plant maintains its own address,
Organization language and country assignment
Distribution
Distribution
Channel
Channel
Division Storage
StorageLocation
Location
Division
Storage Warehouse
StorageLocation
Location Warehouse

Storage Location
Definition:
Storage Location defines the locations were materials can be stored within a plant.
It subdivides the plant from a inventory perspective. A storage location could be a warehouse, part of
warehouse, storeroom.
Operating
OperatingConcern
Concern
Chart
ChartofofAccounts
Accounts Use:
Controlling
ControllingArea
Area
 Storage Location can be used to
Company
CompanyCode
Code Company
CompanyCode
Code Purchasing separate warehouse by material
Purchasing Profit
Organization
Organization Profit types, e.g. MRO items versus raw
Center
Center materials and finished products
Purch
PurchGroup
Group
Plant
Plant Purch
PurchGroup
Group
 Functions that are carried out at
Storage Location level include
Sales Area
Sales
Sales
Cost
Cost Cost
Cost physical inventory and cycle
Organization Center Center counting, material movements and
put away and picking procedures
Distribution
Distribution
Channel
Channel
Division Storage
StorageLocation
Location
Division
Storage Warehouse
StorageLocation
Location Warehouse

Warehouse
Definition:
Warehouse defines a complete physical warehouse structure, subdivided by storage type, storage
sections and storage bins, that allows to manage inventory using random storage and apply putaway
and picking strategies.
Operating Concern
Chart of Accounts
Chart of Accounts
Controlling Area
Controlling Area  SAP recommends using one
warehouse number for each group
of storage areas or buildings
Company Code Company Code Purchasing (warehousing complex) in the
Purchasing Profit
Organization Profit
Organization Center same geographical area
Center
Purch Group
Plant Purch Group
Plant Purch Group
Purch Group  Individual storage areas (high-rack
storage, picking area, etc.) are
defined as storage types within a
Sales Cost Cost warehouse complex and grouped
Sales Center Center
Organization together under a warehouse
number
Distribution
Distribution
Channel
Channel



Questions & Answers


Procure to Pay

SAP Hierarchy Definitions – P2P
Hierarchy Element
Purchasing Organization
Purchasing Group

Purchasing Organization
Definition:
An organizational unit responsible for procuring materials or services for one or more plants and for
negotiating general conditions of purchase with suppliers. The purchasing organization assumes legal
responsibility for all external purchase transactions.
Operating Concern
Use:
Operating Concern
Chart of Accounts
Chart of Accounts  Purchasing specific master
Controlling Area
Controlling Area data is defined at Purchasing
Organization level. Examples
Company Code
Company Code Purchasing
include:
Purchasing Profit
Organization Profit
Organization Center
Center –Vendor Master Data
Purch Group –Pricing
Plant Purch Group
Plant Purch Group
Purch Group
–Vendor Evaluation Criteria
Sales Area
Sales Cost
Cost Cost
Cost
 Purchasing Organization
Sales Center Center
Organization
Organization Center Center defines if procurement function
is:
Distribution
Distribution
Channel
Channel –Corporate-group-wide
–Company-specific
Division
Division
Storage Location
Storage Location –Plant-specific

Purchasing Group
Definition:
The purchasing group is the organizational unit responsible for carrying out the actual activities of
purchasing. Typically, the purchasing group represents a buyer, raw material planner, or a group of
buyers or planners within an organization.
Operating
OperatingConcern
Concern
Chart
ChartofofAccounts
Accounts
Controlling
ControllingArea
Area
Use:
 The purchasing group is a key

Company
CompanyCode
Code Company
CompanyCode
Code Purchasing
Purchasing Profit
field on all purchasing
Organization Profit
Organization Center
Center
documents in SAP and serves
Purch as the main contact person for
Plant PurchGroup
Group
Plant Purch
PurchGroup
Group the document.
Sales Area  It is not directly linked within the

Sales Cost
Cost Cost
Cost
Sales
Organization Center Center SAP hierarchy, but rather
assigned to materials at the
Distribution
plant level.
Distribution
Channel
Channel
 Purchasing group can serve
Division Storage
StorageLocation
Location
multiple purchasing
Division
organizations, plants and
Storage Warehouse
StorageLocation
Location Warehouse companies

Questions & Answers

SAP Organizational Elements
– Company Code – Sales Organization – Purchasing

– Legal Entity – Business Unit
– Country – Country
Organization
– Company worldwide
– Business Unit – Company Code
– Company
– Business Unit Segment – Market Segment
– Business Area – Division – Plant

– Manufacturing Site
– Business Unit – Product Line
– Warehouse
– Country – Business Unit
– Distribution Center
–
–
Product Group
None
– Distribution Channel – Cost Center
– Physical Building
– Sales Channel
–
– Operating Concern – Profit Center
Stockroom
– Global Company
– Business Unit
– Storage Location
– Sales Organizations – Stock Room
– Market Segments – Country
– Warehouse
– Market Segment
– Controlling Area – Product Line
– Plant -Defined
– Global Company – Product Category – Warehouse
– Country
– Cost Center – Storage Type
– Credit Control Area – Department (Budget Center)
– Storage Bin
– Global Company – Plant
– Country – Work Station

SAP Hierarchy – Multi-Company Example

Instance Operating Concern
Group of Companies Client Client

Group of Companies
Management Management
Entity Controlling Area Management Controlling Area Entity Controlling Area
Entity
Chart of Accounts
Business Unit/
Internal
Consolidation Consolidated
Business Unit/ Organization
legal entity
Business Unit/ Group
Internal
B. Area Internal
Organization
Organization B. Area B. Area
Legal Entity
Personnel Company Legal Entity Legal Entity Company Company
Area Code Code Code
CO Code
CO Code level Purchasing Customer level CO Code
Personnel contract, level
Organization
Sub Area Factory /
Internal Project Sales Org Purch Org Sales Org
Project
stock ownership
Locally defined
Purchasing Plant
Plant Group Dist Channel Plant Dist Channel
WBS WBS
Work MRP Plant
Factory/ stock
Center
Work Controller PC / CC Sub-Process ownership
Center Group Business Area
Storage Plant
Location
Storage Profit Division Division
Business Unit /
Location Center Business Unit
Internal organization level
Business Unit
Org. Cost Int level
Unit Center
Cost Order
Center Non-recurring costs -
Work Center, department, etc R&D, Capital, etc Sales Area
Work Center, department, etc

SAP Hierarchy Overview

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SAP Hierarchy – Webinar

30th June, 2007

© 23-Sep-19 IBM Corporation

2 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Organizational Hierarchy

The organizational hierarchy used within SAP is very important …

 It is the fundamental data and functional architecture within the SAP

3 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Data Structure

SAP’s static Client Cost Elements

5 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

The SAP hierarchy is the “backbone” of the

The result is that the SAP Hierarchy provides

6 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Our Ultimate Goal …

7 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Representative View of the SAP Hierarchy

Company Code Company Code

Sales Area Cost Cost

Division Storage Location

Storage Location Warehouse

Key: Financial Procure to Pay Order to Cash Supply Chain(P2M,WM&L)

Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Hierarchy Elements

9 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Hierarchy Elements

10 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Hierarchy Definitions - Finance

11 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Operating Concern Use:

 In addition, you may assign each

Storage Location Warehouse

13 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Division Storage Location

14 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

15 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Division Storage Location

17 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Profit Center Assignments

Internal Order Profit Project WBS

18 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Questions & Answers

19 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Hierarchy Elements

20 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Hierarchy Definitions – Lead to Cash

21 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Distribution  Sales document types are

Division Storage Location

Storage Location Warehouse

22 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

 Complexity and maintenance

Division Storage Location

23 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Storage Location Warehouse

24 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

25 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

Questions & Answers

26 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Hierarchy Elements

27 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

SAP Hierarchy Definitions – Warehouse Mgmt./ Plan to Make

28 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation

29 Webinar-SAP Hierarchy | Confidential © 23-Sep-19 IBM Corporation