Materials Management
(MM) Organizational
Structure
EGN 5620
Enterprise Systems Configuration
Fall, 2015
MM Organizational Structure
SAP Implementation
MM Organizational Structure
Related Topics
 MM
Organizational data & structures
 Organizational
relationships
January 2008
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3
Business Process Integration
FI
MM
SD
Rules
FI
MM
SD
January 2008
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4
MM Organizational Data
MM
January 2008
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5
Organizational Data

A hierarchy
• A multi level structure
• Organizational units at each level of
organization structure are arranged according
to tasks and functions

Static data and rarely changed
January 2008
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6
Organizational Structure
Client
Chart of
Accounts
Company
Credit Control
Area
Fiscal Year
Variant
Controlling
Area
Company
Code
January 2008
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7
SAP Org. Structure
◦ Client
◦ Company
◦ Chart of accounts
◦ Company code
◦ Fiscal year variant
◦ Credit control area
◦ Controlling Area
8
Client (review)
Highest hierarchical level in an SAP
environment
 A complete database containing all the
tables necessary for creating a fully
integrated information system

9
Company
Consolidated financial statements are
created at the company level
 A company can include one or more
company codes
 All company codes must use the same
chart of accounts and fiscal year
 Company is not required in the definition
of an enterprise (optional)

10
Chart of Accounts
A Chart of Accounts contains a
complete list of all of the accounts
utilized in the General Ledger for a given
company
 A chart of accounts must be assigned
to company code in order to create the
General Ledger for that company
 Several company codes can use the
same chart of accounts

January 2008
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11
Company Code (review)





A legally independent entity
Smallest organizational unit for which
accounting can be carried out
Business transactions are processed at
this level
Accounts are managed at this level
Legal financial statements, such as the
balance sheet and the income statement, are
generated at this level required by US SEC
(Securities & Exchange Commission)
January 2008
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12
Fiscal Year Variant
Specifies the accounting fiscal year
for budget and reporting purposes
 Special periods are created to aid in the
quarterly or year-end adjusting process
completed prior to preparing financial
statements
 A single fiscal year variant is assigned
to each company code

13
Credit Control Area
An organizational unit or area of
responsibility created to control
customer credit limits
 A company code is assigned to one and
only one credit control area
 Multiple company codes can be
assigned to one credit control area

14
Controlling Area
An organizational unit that serves to
broadly define a managerial
accounting and reporting system
 Each company code can be assigned to
one and only one controlling area
 Controlling areas can consist of
multiple company codes thereby
enabling cross-company allocations

15
Controlling Area (continued)
Overhead Cost
Accounting
Modules
SD
MM
HR
FI
Cost and
Revenue
Accounting
Product Cost
Controlling
Profit
Center
Accounting
Profitability
Analysis
16
Cost Center Standard Hierarchy




An organizational unit that serves to refine
and focus a managerial accounting and reporting
sub-system
Each standard hierarchy is attached to the
appropriate Controlling Area
All cost centers (groups) of interest must be
entered in the Standard Hierarchy
A mapping of responsibility to individual
managers and cost centers facilitate:
 Expense collection
 Expense tracking
 Expense reporting
17
Cost Center Groups
Logical groupings of cost centers in
the standard hierarchy to establish
accountability and responsibility for one or
more cost centers
 Facilitates reporting, planning, and
allocating costs at a more aggregated
level

18
Cost Centers Designation

Units that are distinguished, for example,
by area of responsibility, location, or
type of activity
◦ Copy center
◦ Security department
◦ Maintenance department
One or more value-added activities are
performed within each cost center
 Can be permanent or temporary (e.g.,
internal order)

19
Profit Centers
primary revenue collection objects in
the system
 posted to all balance sheet postings
 can be attributed by cost centers
 assigned to a single controlling area
and a single company code
 grouped together into a hierarchy to
represent the organization structure for
analysis of income versus expenditure
for different parts of a organization
Some organizations don’t have profit centers

January 2008
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20
SAP MM Organizational Structure
 Plant
 Valuation
Area
 Storage Locations
 Shipping Point
 Purchasing Organizations
 Purchasing Groups
January 2008
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Plant
Lowest valuation area
 Organizational level where Material
Requirements (MRP) runs
 Generally used to describe a production
site, a distribution center or centralized
warehouse
 May be a physical or logical unit

January 2008
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Valuation Area
Valuation area determines at which level a
material is valuated (inventory value is
established)
 SAP ERP allows valuation at the company
code or plant level, but recommends
valuation area be set at the plant
level

January 2008
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Storage Location
Subdivision of a plant
 Where materials are managed (inventory
management)

◦
◦
◦
◦
◦
◦

Raw Materials
Finished Products
Semi-finished products
Trading materials
Miscellaneous materials
Maintenance, Repair, and Other (MRO) materials
May be a physical or logical unit
January 2008
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Organizational Relationship

Plant/Storage Location
Plant P001
Storage Location
10 - Inventory
January 2008
Storage Location
20 - Quality
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25
Shipping Point
Shipping points are independent
organizational entities within which
processing and monitoring of the
deliveries as well as goods issue is carried
out.
 A delivery is processed by one shipping
point only.

January 2008
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26
SAP (Sub)modules in MM (I)
1.
Purchasing Management
 SAP sub-module that involves the acquisition of
goods and services to support the creation of
goods and services in the organization
 Master data for the purchasing management exists
in the (MM) as well as the (FI) modules
 It interfaces with the Production Planning (PP), and
Quality Management (QM) modules
2.
Inventory Management
 A SAP sub-module that involves goods movement,
material stock and inventory controlling, material
documents, & period processing
January 2008
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Purchasing Organization

An organizational unit
• responsible for procuring materials or
services for one or more plants and for
negotiating general conditions of purchase
with vendors.
• Legal responsible for all external purchase
transactions.

A purchasing organization can be assigned
to more than one company code
January 2008
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Organizational Structure
Company Code
C001
Purchasing
Organization – P001
Purchasing
Group
N##
January 2008
Plant P001
Storage Location
10 - Inventory
Storage Location
20 - Quality
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29
Organizational Relationships

Plant/Purchasing Organization (1)
Company code C001
Plant P001
Purchasing
Organization – P001
Purchasing
Organization – P002
One company code/plant – multiple purchasing organizations
January 2008
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Organizational Relationships
(Continued)

Plant/Purchasing Organization (2)
Plant P001
Plant P002
Purchasing
Organization – P001
Purchasing
Organization – P002
Each plant has its own purchasing organization
January 2008
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Organizational Relationships
(Continued)

Plant/Purchasing Organization (3)
Purchasing
Organization – P001
Plant – P001
Plant – P002
One purchasing organization for multiple plants
January 2008
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Organizational Relationships
(continued)

Plant/Purchasing Organization (4)
Purchasing
Organization – P001
Company Code
C001
Company Code
C002
Plant – P001
Plant – P002
One purchasing organization for multiple company codes
January 2008
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33
Purchasing Group
Responsible for specified purchasing
activities
 Often used to identify individual buyers
 Used for reporting

January 2008
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Organizational Relationships

Purchasing Organization/Purchasing Group
Purchasing
Organization – P001
Purchasing Group
001
January 2008
Purchasing Group
002
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35
SAP Modules using MM

Warehouse management (WM)
◦ A SAP module that focuses on managing
materials location in a warehouse
◦ No connection with its financial module
January 2008
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Warehouse Management

WM is not required for purchasing
functionality of SAP ERP

Many functions and elements can be
performed outside of the module
January 2008
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37
Warehouse Management Elements







Receiving, identifying and sorting goods
Placing goods into storage bins
Taking inventory
Monitoring and inspecting goods in storage
Preplanning distribution of materials
Picking and accumulating orders
Packaging, loading and shipping goods
January 2008
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38
Inventory Management & Warehouse
Management Relationships
Company C001
Inventory
Management
(MM)
Storage Loc. 10
Company Code
Plant P001
Plant P002
Plant
Storage Loc. 20
Storage Loc. 30 Storage Loc. 40
Storage Loc.
Warehouse 1
Warehouse 1
Warehouse
Aisle 1
Aisle 2
Aisle 3
Aisle 1
Aisle 2
Aisle
Rack 1
Rack 1
Rack 1
Storage Rack
Warehouse
Management (WM)
January 2008
ABC123
Quantity
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reserved.
39
MM Rules
MM
Rules
MM
January 2008
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Rules
Rules define the parameters for Master
Data and Transactions
 Rules determine functionality for Master
Data and Transactions
 Rules are relatively fixed
 Rules change, when corporate policy
changes

January 2008
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41
Rules in Material Management
•
•
•
•
•
•
•
•
•
Fiscal Periods
Account Groups
Material Types
Plant Parameters
Purc./Rec./Inv.
Tolerances
Automatic Account
Assignment
Reservations
Material Group
Loading Group
January 2008
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42
Global Bike, Inc.
MM
Organizational Structure
GBI. Organizational Structures
Credit Control
Area (GL##)
Client (330)
Fiscal Year
Variant (K1)
Chart of
Company
Accounts (GL##)
Code (US##)
Controlling
Area (NA##)
Purchasing
Organization
(US##)
Plant (DL##
/MI##/SD## )
Cost Center Standard
Hierarchy (NA##)
RM## FG##
N10##
Purchasing
Group (N##)
N10## N10##
N10##
SF## TG##
MI##
N11##
N12##
Work center
(ASSY/INSP/PACK
/MANT/SERV)
N10##
NAEX10##
Shipping Point (DL##/MI##/SD##)
NAEX20##
Cost center
groups
NAIS10##
Cost centers
Exercises: (Due Date 9/21/2015)
1. Define account group
2. Copy document number range
3. Set up company for payment transaction
4. Maintain number ranges for controlling
5. Define tolerance groups for employees
6. Define retained earnings account
7. Copy general ledger accounts
8. Create standard hierarchy
9.Maintain purchasing organization
10.Assign purchasing organization
11. Assign purchasing organization to plants
12.Create purchasing group
13.Group together valuation areas