1. Materials Management (MM) Organizational Structure EGN 5620 Enterprise Systems Configuration Spring, 2015

2. MM Organizational Structure SAP Implementation MM Organizational Structure SAP Implementation

3. 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

4. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.4 Business Process Integration FI MM SD Org Data Rules FI MM SD Master Data FI MM SD FISD MM

5. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.5 MM Organizational Data MM Org Data

6. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.6 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.

7. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.7 Client Company Chart of Accounts Company Code Fiscal Year Variant Credit Control Area Organizational Structure Controlling Area

8. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.8 SAP Org. Structure (review) ◦Client ◦Company ◦Chart of accounts ◦Company code ◦Credit control area ◦Fiscal year variant

9. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.9 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

10. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.10 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

11. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.11 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)

12. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.12 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 using the General Ledger balances

13. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.13 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

14. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.14 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

15. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.15 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

16. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.16 Controlling Area (continued) Modules SD MM HR FI Cost and Revenue Accounting Profit Center Accounting Overhead Cost Accounting Profitability Analysis Product Cost Controlling

17. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.17 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

18. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.18 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

19. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.19 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)

20. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.20 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

21. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.21 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

22. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.22 SAP MM Organizational Structure Plant Valuation Area Storage Locations Shipping Point Purchasing Organizations Purchasing Groups

23. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.23 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

24. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.24 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

25. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.25 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

26. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.26 Organizational Relationship Plant/Storage Location Storage Location 20 - Quality Storage Location 10 - Inventory Plant P001

27. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.27 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.

28. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.28 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

29. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.29 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 more than one company code

30. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.30 Organizational Structure Purchasing Organization – P001 Company Code C001 Storage Location 20 - Quality Storage Location 10 - Inventory Plant P001 Purchasing Group N##

31. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.31 Plant/Purchasing Organization (1) One company code/plant – multiple purchasing organizations Purchasing Organization – P002 Purchasing Organization – P001 Plant P001 Organizational Relationships Company code C001

32. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.32 Plant/Purchasing Organization (2) Each plant has its own purchasing organization Purchasing Organization – P002 Plant P002 Purchasing Organization – P001 Plant P001 Organizational Relationships (Continued)

33. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.33 Plant/Purchasing Organization (3) One purchasing organization for multiple plants Plant – P002Plant – P001 Purchasing Organization – P001 Organizational Relationships (Continued)

34. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.34 Organizational Relationships (continued) Plant/Purchasing Organization (4) One purchasing organization for multiple company codes Company Code C002 Company Code C001 Purchasing Organization – P001 Plant – P002Plant – P001

35. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.35 Purchasing Group Responsible for specified purchasing activities Often used to identify individual buyers Used for reporting

36. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.36 Organizational Relationships Purchasing Organization/Purchasing Group Purchasing Group 002 Purchasing Group 001 Purchasing Organization – P001

37. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.37 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

38. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.38 Warehouse Management Not required for purchasing functionality of SAP ERP A separate module in the SAP ERP environment Many functions and elements can be performed outside of the module

39. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.39 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

40. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.40 Company C001 Plant P001 Storage Loc. 10 Warehouse 1 Aisle 1 Rack 1 Aisle 2 Rack 1 Aisle 3 Storage Loc. 20 Plant P002 Storage Loc. 30 Warehouse 1 Aisle 1 Rack 1 ABC123 Aisle 2 Storage Loc. 40 Inventory Management & Warehouse Management Relationships Inventory Management (MM) Warehouse Management (WM) Company Code Plant Storage Loc. Warehouse Aisle Storage Rack Quantity

41. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.41 MM Rules Rules MM

42. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.42Rules 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

43. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.43 Rules in Material Management Fiscal Periods Account Groups Material Types Plant Parameters Purc./Rec./Inv. Tolerances Automatic Account Assignment Reservations Material Group Loading Group

44. Global Bike, Inc. MM Organizational Structure Global Bike, Inc. MM Organizational Structure

45. GBI. Organizational Structures Plant (DL## /MI##/SD## _) Client (320) Chart of Accounts (GL##) Company Code (US##) Fiscal Year Variant (K1) Credit Control Area (GL##) Purchasing Organization (US##) Purchasing Group (N##) Controlling Area (NA##) RM##FG## Cost Center Standard Hierarchy (NA##) NAEX10## Work center (ASSY/INSP/PACK /MANT/SERV) Shipping Point (DL##/MI##/SD##) SF## TG## MI## N10## N10## N10## N10## N10## N11## N12## NAIS10## NAEX20## Cost centers Cost center groups

46. Exercises: (Due Date 2/9/2015) 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