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Table of content

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Table of content1 Organization of an Enterprise in the SAP System1.1 Example: Working with Reference Purchasing Organizations

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Organization of an Enterprise in the SAP System This section describes the organization of an enterprise in the SAP system. It also demonstrates how Purchasing is integrated into this structure.

Definition

Organizational Levels

The structure of an enterprise is represented in the SAP System by the following organizational levels:

Client A grouping or combination of legal, organizational, business and/or administrative units with a common purpose.

Example: a corporate group.

Company code This level represents an independent accounting unit within a client. Each company code has its own balance sheet and its own profit and loss statement.

Example: a subsidiary company, member of a corporate group.

PlantOperational unit within a company code.

Example: production facility, branch office.

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. Thepurchasing organization assumes legal responsibility for all external purchase transactions.

Purchasing groupThe purchasing organization is further subdivided into purchasing groups (buyer groups), which are responsible for day-to-day buying activities. A purchasing group can also act for several purchasing organizations.

Structure

Assignments of Organizational Levels "Plant", "Purchasing Organization", and "Company Code"● Plant - purchasing organization/company code

In the SAP system, a plant must be assigned to one or more purchasing organizations.Furthermore, a plant must always be assigned to a company code.

● Purchasing organization – company codeA purchasing organization can (but need not) be assigned to a company code.If you do not assign a company code to a purchasing organization, the latter can engage in procurement operations for every company code. A prerequisite for this is that the plant for which procurement is carried out is assigned to the purchasing organization.

Organization of Purchasing

Centralized/Distributed Purchasing

You can organize your purchasing function in the following ways:● Centralized purchasing, with just one purchasing organization● Distributed purchasing, with a number of different purchasing organizations each responsible for different plants

The following graphic illustrates the different ways of organizing your purchasing function in the SAP System:

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For more information on the organizational structure of an enterprise's purchasing function, see the Implementation Guide (IMG) for the Enterprise Structure(section Maintaining a Purchasing Organization ).

Reference Purchasing Organization

Depending on the way your system is set up, either a central purchasing department can exist side by side with, but separate from, local purchasingdepartments, or local purchasing departments can make use of contracts and conditions created by the central purchasing department. The latter situation can bereplicated with the aid of Reference Purchasing Organizations.

You can either assign a reference purchasing organization to a company code or not assign it to any company codes. As a rule, no plants areassigned to the purchasing organization. However, if you wish, you can assign one, two, or several plants to it.

An example of reference purchasing organizations can be found in the section Example: Working with Reference Purchasing Organizations.Advantages of a Reference Purchasing Organization

● A reference purchasing organization can negotiate a comprehensive contract that can be used by other purchasing organizations.The purchasing organizations responsible for procurement in the individual plants can issue release orders against this Centrally Agreed Contract, thusavailing themselves of its more favorable terms and conditions.More information on centrally agreed, corporate-wide contracts is available in the section Centrally Agreed Contract.

● SAP Application Link Enabling (ALE) allows individual companies belonging to a group but working with separate SAP systems to make joint use ofcontracts. In such cases, the latter are referred to as “distributed contracts”.For more information on this topic, refer to the section Distributed Contracts.

Working with a reference purchasing organization saves time and effort in maintaining data because purchasing organization data for vendormaster records and purchasing info records only has to be created by the reference purchasing organization. Other purchasing organizations thatare linked to the latter via Customizing can use this data without having to maintain data themselves.

Cross-Company-Code Stock Transfer

You can set up your system in such a way that one purchasing organization procures material for a plant from a vendor (plant) that belongs to another companycode within the same client (corporate group). This is an instance of an cross-company-code (inter-company) stock transfer with an SD delivery and a billingdocument.

For information on cross-company-code stock transfers, refer to the documentation MM Special Stocks and Special Forms of Procurement in MaterialsManagement (section Cross-Company-Code Stock Transfers).

1.1 Example: Working with Reference PurchasingOrganizations The reference purchasing organization RORG, which belongs to head office in Atlanta, has negotiated a comprehensive contract for the material Steel bolt 01with favorable conditions with vendor Smith Corp.

The purchasing organization EORG , responsible for procurement in the Houston and Austin plants, wants to issue release orders for the material Steel bolt01 against this contract. Purchasing organization EORG procures other consumable materials from regional suppliers.

Prerequisites:

Before the purchasing organization EORG can issue release orders against the above contract, the following settings and data must have been maintained:

Maintaining Customizing Settings

Both purchasing organizations are maintained in Customizing for the Enterprise Structure underDefinition → Materials Management → Maintain Purchasing Organization.

The reference purchasing organization RORG can be maintained with or without a company code and plant(s).The purchasing organization EORG is assigned to company code 1000 and the two plants.Purchasing organization RORG is maintained as the reference purchasing organization for the purchasing organization EORG in Customizing for theEnterprise Structure (→ Assignment → Materials Management → Assign Purch. Organization to Reference Purch. Organization) .

Entering Application and Master Data

The vendor Smith Corp. is maintained for both purchasing organizations.The material Steel bolt 01 is maintained for the plants Houston and Austin.A centrally agreed contract has been created without a plant by the reference purchasing organization RORG .

The following graphic illustrates which data you have to maintain:

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Process Flow

An employee belonging to the purchasing organization EORG creates a purchase requisition for the plant in Houston.The purchasing department processes the requisition and carries out a source determination procedure.The contract of the reference purchasing organization is determined as a valid source.

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