Materials Management (MM) Organizational Structure

Materials Management
(MM) Organizational
Structure

EGN 5620 Enterprise Systems Configuration
(Professional MSEM)
Fall, 2012

MM Organizational Structure

SAP Implementation

(Professional MSEM)
Fall, 2012

January 2008
SAP AG - University Alliances and
The Rushmore Group, LLC 2008. All
rights reserved. 3
MM Organizational Structure
Related Topics
MM and organizational data
Organizational data & structures
Organizational relationships
Warehouse management
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Business Process Integration
R
u
l
e
s

FI
MM
SD
FI SD
MM
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MM Organizational Data
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Organizational Data
A hierarchy in which the organizational
units in an enterprise are arranged
according to tasks and functions

Are static data and are rarely changed

The definition of organization units is a
fundamental step; it is a critical factor in
how the company will be structured and
run.

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Client
Company
Chart of
Accounts
Company
Code
Fiscal Year
Variant
Credit Control
Area
Organizational Structure
Controlling
Area
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SAP Org. Structure (review)
Client
Company
Chart of accounts
Company code
Credit control area
Fiscal year variant

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Client (review)
Highest hierarchical level in an SAP
environment
A complete database containing all the
tables necessary for creating a fully
integrated information system
Master records are created at the client
level
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Chart of Accounts (review)
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
every company code in order to create the
General Ledger for that company
Several company codes can use the same
chart of accounts

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Company (review)
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)
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Company Code (review)
A legally independent entity
The 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 using the
General Ledger balances

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Fiscal Year Variant (review)
Specifies the accounting fiscal year for
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

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Credit Control Area (review)
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
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Controlling Area (review)
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
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Controlling Area (continued)
Modules
SD
MM
HR
FI

Cost and
Revenue
Accounting

Profit
Center
Accounting
Overhead Cost
Accounting
Profitability
Analysis
Product Cost
Controlling
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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

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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

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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)

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Cost Centers (continued)
Operates as a collector and assignor of
responsibility for expenditures
A way to identify and track where costs
are incurred for evaluation purposes

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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 dont have profit centers

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SAP MM Organizational Structure
Plant
Valuation Area
Storage Locations
Shipping Point
Purchasing Organizations
Purchasing Groups

January 2008
SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights
reserved. 23
Company C001
Plant P001
Plant P002
Storage Loc. 30
Storage Loc. 10
Warehouse 1
Warehouse 1
Aisle 1 Aisle 1 Aisle 2 Aisle 2 Aisle 3
Rack 1 Rack 1
Rack 1
ABC123
Storage Loc. 40
Storage Loc. 20
Organization structure (Plant)
- inventory vs. warehouse mgt.
Inventory
Management
(MM)
Warehouse
Management (WM)
Company Code
Plant
Storage Loc.
Warehouse
Aisle
Storage Rack
Quantity
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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
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Valuation Area
The valuation area determines at which
level a material is valuated (inventory
value is established)
SAP R/3 allows valuation at the company
code or plant level, but recommends
valuation area be set at the plant level
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Storage Location
Subdivision of a plant
Where materials are managed (inventory
management)
Raw Materials
Maintenance, Repair, and Other (MRO) materials
Finished Products
May be a physical or logical unit
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Organizational Relationship
Plant/Storage Location
Storage Location
20 - Quality
Storage Location
10 - Inventory
Plant P001
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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.

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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

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SAP Modules using MM (II)
Warehouse management

A SAP module that focuses on managing
materials location in a warehouse

No connection with its financial module
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Purchasing Organization
Organizational unit is responsible for the
procurement of materials and services.
SAP requires that purchasing organizations
be assigned at the plant level
A purchasing organization can be assigned
to more than one plant
A purchasing organization can be assigned
to a company code
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Plant/Purchasing Organization (1)

One plant multiple purchasing organizations
Purchasing
Organization P002
Purchasing
Organization P001
Plant P001
Organizational Relationships
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Each plant has its own purchasing organization
Purchasing
Organization P002
Plant P002
Purchasing
Organization P001
Plant P001
(Continued)
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One purchasing organization for multiple plants
Plant P002 Plant P001
Purchasing
Organization P001
(Continued)
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(continued)
One purchasing organization for multiple company codes
Company Code
C002
Company Code
C001
Purchasing
Organization P001
Plant P002 Plant P001
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Purchasing Group
Responsible for specified purchasing
activities
Often used to identify individual buyers
Used for reporting

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Purchasing Organization/Purchasing Group
Purchasing Group
002
Purchasing Group
001
Purchasing
Organization P001
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Purchasing
Organization P001
Company Code
C001
Storage Location
20 - Quality
Storage Location
10 - Inventory
Plant P001
Purchasing
Group
001
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Warehouse Management
Not required for purchasing functionality
of SAP R/3
A separate module in the SAP R/3
environment
Many functions and elements can be
performed outside of the module

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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

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Company C001
Plant P001
Plant P002
Storage Loc. 30
Storage Loc. 10
Warehouse 1
Warehouse 1
Aisle 1 Aisle 1 Aisle 2 Aisle 2 Aisle 3
Rack 1 Rack 1
Rack 1
ABC123
Storage Loc. 40
Storage Loc. 20
Inventory Management & Warehouse
Management Relationships
Inventory
Management
(MM)
Warehouse
Management (WM)
Company Code
Plant
Storage Loc.
Warehouse
Aisle
Storage Rack
Quantity

PEN, Inc.
MM

(Professional MSEM)
Fall, 2012

Pen Inc. Organizational Structures
Plant
(Pxxx)
Client (600)
Chart of
Accounts (Cxxx)
Company
Code (Cxxx)
Fiscal Year
Variant (2012)
Credit Control
Area (Cxxx)
Purchasing
Organization
(Pxxx)
Purchasing
Group (xxx)
Shipping
Point
(Sxxx)
Controlling
Area (Cxxx)
SL10 SL20
Cost Center
Standard
Hierarchy
(PENINCxxx)
ADMINxxx
A005 A015 A020
A010
Exercises: (Due Date 8/18/2012)
60. Create Vendor Master Accounting
61. Create Vendor Master Purchasing Record
62. Create Vendor Master Record Centrally
69. Create material Master for Trading Goods
82. Create Vendor Master Record for Landlord
83. Create Rent Expense Account
84. Create for Invoice Receipt for Rent Expense
85. Display and Review G/L Account Balances and
Individual Line Items

Exercises:
86. Display and Review Vendor Account Balances
and Individual Line Items
87. Post Payment to Landlord
88. Display and Review G/L and Vendor Account
Balances and Individual Line Items
124. Create Shipping Point

201.Create Controlling Area
202. Assign Company Code to Controlling Area
203. Create Cost Center Standard Hierarchy
211. Maintain Cost Center Standard Hierarchy

Materials Management (MM) Organizational Structure

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