INFS 5024 - Enterprise Systems

Module 3a
Organisational Units and Structures
 Objectives

• Appreciate why organisational structures must be

reflected in an enterprise system
• Understanding how an enterprise system like SAP
captures organisational structures
• Understand what an organisation unit is
 SAP Organisational Units

• An enterprise maps its real-world organisational

structures (made up of departments, offices, plants,
divisions, etc) to the organisational units (elements)
available in SAP
• Organisational units are the basic elements representing
an enterprise’s structure
• Core organisational units are client, company code,
plant and business area.
• All organisational units in SAP are assigned a unique
code when they are selected.
 Description of Key Organisational Units

– A client is a legally and organisationally independent unit at the

highest level.
– A company is an independent entity within a client that
produces public balance sheets and profit/loss statements.
– A business area is used to produce internal balance sheets and
profit/loss statements.
– A sales organisation is responsible for negotiating sales
conditions and distributing materials and services. The
revenues of a sales organisation are assigned to only one
company code.
– A distribution channel is an organisational unit that determines
how material reaches a customer.
– A division is an organisational unit with responsibility for sales
or profits from saleable materials or services.
 Description of Key Organisational Units

• A sales area is a subdivision of a sales organisation used to

specify responsibility for the sale and distribution of materials
assigned to a specific division and distributed by a specific
distribution channel.
• A plant is an organisational unit within a company
corresponding to a location, facility or branch. A plant is
uniquely assigned to only one company code
• A storage location is used to distinguish an area within a plant
for inventory purposes.
• A shipping point carries out shipping activities. It can be the
company’s mail department or a plant’s rail depot.
• A loading point is the physical location within a shipping point
where goods are loaded for shipping.
 (Partial) SAP Organisational Diagram

Company
code
System

Business
area
System

Sales Plant
area
System System
<<
Sales Distribution Shipping Plant
Division
organization channel point warehouse
System System System System System

Loading
point
System

An Organisational Diagram is a model of the relationships between organisational units.

 Enterprise Structure and the Database

• Organisational units establish the database foundations on

which transactions are handled. The data in the database
is grouped by the organisational units and determines
where specific business transactions will be stored.
• No data can be entered into the database until all relevant
organisational units are selected and specified.
• The organisational structure (meaning the structure of the
enterprise) specifies how the data of business processes is
related (for the purpose of managing a company).
• The organisational structure is realised by the use of key
fields in the database tables.
 Enterprise Structure and the Database

• Mapping an enterprise’s structure to the database is

critical to establishing the enterprise’s reporting
requirements. If an enterprise wants to revise its
organisational structure during the implementation of a
SAP System, then this needs to be done very early in
the implementation.
• The organisational structure (that we implement) is the
basis for the organisational arrangement of the chart of
accounts and other reporting relationships.
• The SAP System is an integrated system based on
accounting principles that support the monitoring and
controlling of the company. Data must be available in an
arrangement that supports decision making and
reporting.
 GBI Structure for Financial Accounting

Global Bike Client

Global Bike Inc. Global Bike Germany GmbH Company

Code

Global Bike Chart of

Chart of Accounts
Accounts

Bikes Business Area

Global Credit Control

Credit Control
Area
 Financial Accounting View of Organizational Units

Production Client

FI FI
Company Code Company Code

FI
Business Area

Primarily concerned with meeting external financial reporting

requirements – balance sheet, income statement and cash-
flow statement - as required by law.
 Financial Accounting Organizational Units

• Company Code:
– Independent accounting entity used to report taxes
– Smallest entity for which a complete set of accounts can be kept

• Business Area:
– Internal organizational unit used to create internal Profit and Loss
statements for common parts of the business
 GBI Structure for Controlling

Global Bike Client

Global Concern Operating

Concern

Controlling Controlling Controlling

North America Europe Area

Global Bike Inc. Global Bike Germany GmbH Company

Code
 Controlling View of Organisational Units

C
Controlling Area O
FI
Company Code

C EC
Cost Center O
Profit Center

FI
Business Area

Primarily concerned with internal (managerial) accounting,

control and reporting.
 Controlling Organisational Units

• Company Code:
– Independent accounting entity used to report taxes
– Smallest entity for which a complete set of accounts can be kept
• Controlling Area:
– Independent organizational structure for which costs and
revenues are collected (can have many company codes assigned
to it)
• Profit Center:
– a unit that collects revenue usually product lines (cost centers are
assigned to profit centers)
• Cost Center:
– a unit that collects commonly related costs
 Example of a Financial Accounting & Controlling
Organisational Structure
Controlling
Controlling Area
Area 1000

Company AA01 US01

Code

Business
Area
Flat Scrn CRT

Profit Center CVSfs17 CVSfs19 CVScrt17

R B B D A S H
Cost Center A D R
W & & I A
M
F P S L
I
T N E
S
 GBI Structure for Sales and Distribution

Global Bike Client

Global Bike Inc. Global Bike Germany GmbH Company

Code

US West US East Germany North Germany South Sales

Organization

San Diego Dallas Miami Hamburg Heidelberg Sales Office

 Sales and Distribution View of Organizational Units

CO
FI
Controlling Area
Company Code

SD CO
Sales Cost Center
Organization EC
Profit Center
SD SD
Distribution FI
Sales Area
Channel
Business Area

SD

Division

Primarily concerned with controlling what products can be

sold by which methods of delivery and by which selling groups.
 Sales & Distribution Organisational Units

• Sales Organisation
– An organisational unit responsible for the sale of certain products
or services. You can assign any number of distribution channels
and divisions to a sales organization.
• Division:
– A way of grouping materials, products, or services.
• Distribution Channel
– The way in which products or services reach the customer.
Examples include wholesale, retail, online retail, etc.
• Sales Area
– A combination of 3 organisational units (one sales organisation,
one division and one distribution channel). This is how we control
what products can be sold by what methods of delivery and by
which selling groups.
 Example of a S&D Organizational Structure

Company
Code Company

Sales
Organisation 1000 2000 3000

Distribution
Channel 10 20 10 10

Division 01 02 01 02 01 01

= Sales area
 Examples for Practicing at Home

• In a typical airline company, what would identify as

the “Plant”? Where are the “Loading/Shipping
Points”? How would you identify the “Business Areas”
• In a typical university, what would you identify as the
“Plant”? How would you define the “Business Areas”
or “Sales Organisations” or “Loading/Shipping Points”
or “Distribution Channels”
• In a typical bank or credit union, what would you
identify as the “Plant”? Etc.
 Summary

• SAP Organisational Structures

• Organisation Structures in 2 Functional Areas
• Key Organisational Structures
• Enterprise Structure and Database Structures
• Organisational Units
• GBI Example