Enterprise Structure in SAP MM

22 September, 2020


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Enterprise Structure 

Defining and Assigning Organizational Units

Define Company: The client is a commercial, organizational unit within the R/3 system, with its own data, master records, and set of tables.

From a business perspective, the client forms a corporate group.

Company: It is an Organizational Unit for which financial statements can be drawn up according to relevant commercial law.

Note: A Company can have one or more company codes.

Customization Step: SPRO -> Enterprise Structure -> Definition -> Financial Accounting ->Define company (SPRO)

Define Company Code

Company code: The company code is the smallest organizational unit for which you can have an independent accounting department within external accounting

A company code represents an independent accounting unit, for example, a company within a corporate group(client).

Company Code

• It is the smallest Organizational Unit

• Each company code has its own Balance sheet and P&L Account.

• Company Code is a subsidiary of Company or a member of a corporate Group

Customization Step: SPRO -> Enterprise Structure -> Definition ->Financial Accounting -> Edit, Copy, Delete, Check Company Code (EC01)

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Define Controlling Area

  • A controlling area identifies an independent organizational structure for which costs and revenues are collected.
  • Each controlling area can have one or more company codes assigned to it(see below)


Controlling Area:

• It is an Organizational Unit within a company.

• It represents a closed system for accounting purposes.

• Controlling area may be assigned to one or more company codes, but company code must use the same operative Chart of Account.

Customization Step: SPRO -> Enterprise Structure -> Definition ->Controlling -> Maintain Controlling Area(OX06)

Define Plant

A plant is an organizational logistics unit that structures the enterprise from the perspective of production, procurement, plant maintenance, and materials planning

A plant is a manufacturing facility or branch within a company


It is an Operational Unit within a company code.

It is a place where materials are produced or Goods/Services are provided.

A Plant can be having

  • Manufacturing facility
  • Regional Sales Office
  • Central Delivery warehouse
  • Corporate HQ
  • Maintenance Plant

Note: A Plant must always be assigned to a company code.

Valuation Area:

It is an organizational level at which material is valued.

Plant and company codes are two possible valuation areas in the R/3 System.

Important Note: Defining the valuation level in Customizing is a fundamental setting, and is very difficult to reverse.


Customization Steps:

1. Enterprise Structure? Definition? Logistic-General? Define the valuation level (OX14)

Valuation Level

You define the valuation level by specifying the level at which material stocks are valuated You can valuate material stocks at the following levels:

Plant level

Note: Valuation must be at this level in the following cases

If you want to use the application component Production Planning (PP) or Costing or If your system is an SAP Retail system

Company code level

Note: SAP recommends setting material valuation at the plant level.

2. Enterprise Structure ->Definition ->Logistic-General-> Define, copy, delete, check plant (EC02/OX10)

Define Storage Location

  • A location is an organizational unit that allows the differentiation of material stocks within a plant.
  • Inventory Management on a quantity basis is carried out at a storage location in the plant.
  • Physical inventory is carried out at the storage location level.

Storage Location:

• It is an Organizational unit, which allows the differentiation of Material Stock within a Plant. It holds the Goods.

• Under the plant there may be different storage locations. However, the storage location of one plant cannot be used for the other plant.

• Storage locations are not assigned to the plants separately, because at the time of creation itself we create storage location with respect to plant.

Note: Physical inventory is carried out at the storage location level.

Customization Steps: SPRO->Enterprise Structure-> Definition ->Material Management-> Maintain storage location (OX09)

Define Purchasing Organization

  • A purchasing organization is an organizational level that negotiates conditions of purchase with vendors for one or more plants. It is legally responsible for completing purchasing contracts.
  • A purchasing group is a key for a buyer or group of buyers responsible for certain purchasing activities.

Purchasing Organization:

  •  It procures the material and services.
  •  It negotiates conditions of purchase with the vendors.
  •  It is responsible for completing the procurement contracts

Purchasing organization types:

1. Centralized Purchasing

Corporate Group-wide purchasing

Company-specific Purchasing

2. Distributed Purchasing


So a Purchasing Organization Can be assigned to

  • Several company Codes.
  • One Company code
  • One or More Plants

Note: - Purchasing organizations can also exist without assigning to a company code.

Each Purchase organization has its own

Info Record and Conditions for pricing.

Own Vendor master Data.

The vendor is assigned to only one purchase organization.

Each Purchasing Organization evaluates its own vendors using MM Vendor Evaluation.

Reference Purchase Organization: A purchase organization whose conditions and contracts other purchasing organizations linked to it may access and use.

Standard Purchase Organization: If several Purchase organizations procure for a plant, you can define one of them as a standard Purchase Organization. In Source determination for ‘Stock Transport’ and ‘Consignment’ and for the good issue of ‘Pipeline material’ system utilizes the standard purchase organization automatically.

Customization Steps: SPRO ->Enterprise Structure->Definition-> Material Management ->Maintain purchasing organization (SPRO)

Assigning of Organizational Units

Customization Steps:

SPRO -> Enterprise Structure ->Assignment -> Financial Accounting -> Assign company code to company (SPRO)

SPRO ->Enterprise Structure -> Assignment ->Controlling ->Assign company code to controlling area (OX19)

SPRO-> Enterprise Structure -> Assignment -> Logistic-General ->Assign plant to company code (OX18)

SPRO ->Enterprise Structure -> Assignment ->Material Management->Assign purchasing organization to co-code (SPRO)

SPRO-> Enterprise Structure -> Assignment -> Material Management -> Assign purchasing organization to plant (SPRO)

Related Articles to Get In-Depth Knowledge:

Creation of Organization Structure in SAP MM


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