SAP SD Organizational Structure

This tutorial is part of SAP SD training course and it explains about SAP SD organizational structure. After following the tutorial, you will learn how to model enterprise structure in SAP SD (Sales and Distribution) module of SAP ERP. Knowledge of SAP SD organizational structure is fundamental for analysts and consultants that specialize in SAP SD and here you will learn about each the SD organizational units.

Target Audience of this Article

• Readers interested in learning about SAP SD
• SAP Consultants already having experience in other SAP’s module other than Sales & Distribution and are interested in learning more about SAP Sales & Distribution
• Clients or Users at user end willing either implementing SAP or will be implementing SAP in the future to understand jargons which SAP Consultants use

Foreword

Like any other organization’s structure, be it the reporting structure mentioned in the organizational chart, departmental structure, reporting hierarchy, signing mandate hierarchy, processes and procedurals structure; which is mandatory for smooth processing of business processes. Hence, SAP ERP has its own organizational structure. Every module of SAP has its own enterprise structure. Enterprise structure helps in building a hierarchy and structure to streamline the business processes.

Before initiating implementation, designing and configuring the actual system, Enterprise Structure is defined in the Business Blueprint documentation phase. It is an important step is to define the organizational structures. It requires thorough analysis of how your organization currently runs and the business wants to run its business after implementation of SAP.

If the organization is huge, dealing with multiple line of businesses, its processes are complex and if it is scattered geographically at different locations within the country, region, continent or globe; designing and finalizing the Enterprise Structure is a very critical, vital and time taking activity. Several meetings can be called with the Business Process Owners and Subject Matter Experts to finalize the Enterprise structure which may also require endorsement and approval from the higher management. Sometimes sign off on SAP Enterprise Structure is obtained separately during the Business Blueprinting phase.

SAP SD Organizational Structure

In the SAP ERP, several structures can be used to represent the legal and organizational structure of the company. Organizational elements can be structured from the point of view of accounting, materials management and sales and distribution. It is possible to combine these structures. The organizational structures form a framework in which all business transactions can be processed.

Following organizational units represents Sales and Distribution module:

• Sales Organization
• Distribution Channel
• Division

Sales and Distribution module uses some other organizational units which are maintained by other module in SAP, such as:

• Company Code (Finance Module)
• Plant (Material Management Module)
• Storage Location (Material Management Module)

The organizational units discussed below are relevant to SAP Sales and Distribution only.

Graphical Overview of Enterprise Structure in SAP Sales & Distribution

Company Code

Company Code in SAP is the organizational unit which is the created in Finance (FI) module and same is linked with Sales & Distribution module. Company Code represents an independent company. Company which is a legal entity and statutory requirement is to maintain Balance Sheet and Profit and Loss Statement are created and maintained at the Company Code level.

In a scenario where the model is that a corporate group or group of companies are carrying out their businesses in different sectors of economy, every Company by law is a legal entity which is liable to maintain separate book of accounts. All books of accounts are maintained at Company Code level.

Sales Organization

Sales Organization in SAP Sales & Distribution module is at the highest level in organizational structure and is primarily responsible for carrying out and monitoring sales. Sales Organization is responsible for devising sales strategies which are to be executed to gain market share.

If there are any Customer’s complaints regarding the goods and services which the company primarily is responsible for, all such queries and complaint handling is done at Sales Organization level. A Sales Organization is assigned to a unique Company Code. If the business is of such nature, one or more Sales Organizations can be created and assigned to a Company Code.

All the sales reporting is accumulated at Sales Organization level. Reporting is carried out by Sales Organization. If you want to see sales performance of one sector your business, you will select the Sales Organization and all the sales pertaining to the select Sales Organization will be displayed.

All Sales and Distribution documents are assigned to a single Sales Organization. If you want to use SAP SD, at least one Sales Organization must exist.

Distribution Channel

A Distribution Channel in simple terms refer to your strategy how you penetrate in the market with you offering either product or a service or both. It is your mean how you would like to reach to your customer or end consumer. Examples of Distribution Channel can be, but not limited to; Sales to Wholesale Customers, Retail sales, Institutional sales, Internet sales, Employee Sales, Fair Price Shop, etc.

Different categories of Customers can be reached through one or more Distribution Channels within a Sales Organization. To proceed with sales processing, at least one Distribution Channel is required.

Division

Division is used to group certain nature of goods and services which share some traits or properties. It also serves and represents the product line of your business. When executing sales in SAP Sales and Distribution, at least one division should be available in the SAP system. Materials which are sold to the customer should be assigned to a division.

Example we can take is of any automobile dealer having offering 3s services. Namely: Sales (of cars new or used), Service and Spare parts.

Sales Area

In SAP Sales and Distribution, Sales Area is just a of combination of Sales Organization, Distribution Channel and Division. It defines that a certain Sales Organization employed certain strategy of market reach i.e. a Distribution Channel to sale a good or service belonging to a certain division.

Every sales document in SAP Sales and Distribution is assigned to a single Sales Area. Sales reporting can be further refined or drilled when you restrict and select a certain Sales Area in the SAP system.

Plant

Plant in the SAP system is broader term which has a varying definition when different logistics modules come into discussion.

• In Materials Management (MM) module, Plant is referred to facility where the material stock is kept, stored and inventory is maintained
• In Production Planning (PP) module, Plant is referred to a production facility where the production of goods is done
• In Sales and Distribution (SD) module, Plant is a facility from where the finished product is distributed or dispatched to customer

In SAP Sales and Distribution, to proceed with the sales and dispatching, one Plant is required.

Storage Location

Storage Location is an organization unit in logistics which assigned to a Plant where the stock is kept. Storage Location can be characterized and vary based on their properties like Raw Material Storage Location, Finished Goods Storage Location, Spares Storage Location, Returns Sales Storage Location, Temperature Controlled Storage Location, etc.

Shipping Point

For shipping the product to the customer, Shipping Point is required. Shipping Point is assigned to a Plant. A Plant can have several shipping points based on the dispatch activities required for the shipping. For instance, some materials are fragile in nature and require extra care while dispatching maybe it requires manual labor or a product which is heavy in nature and require tools such as fork lifter or crane.

Several Plants can have one Shipping Point provided if they are physically located within the same vicinity.

Sales Office

Business often setup several Sales Offices apart from the head office or headquarters to reach the market in depth. These Sales Offices are often located at different geographical areas. Sales reporting can be executed with Sales Office organizational unit to analyze the performance of Sales Offices. It basically acts as a liaison office between Company’s headquarters, sales department and the Customer.

Sales Group

Employees belonging to certain Sales Office can be referred as Sales Groups. These Sales Groups are assigned to their respective Sales Offices. It is a subset of Sales Office.

Graphical Overview of Extended SAP SD Organizational Structure

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