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1. Organizational Structure

1. What are the organizational levels of the Enterprise Structure in R/3?

A: The top level of the organizational plan is the Client, followed by Company Code, which represents a
unit with its own accounting, balance, P&L, and possibly identity (subsidiary). The next level down is
Plant, an operational unit within a company (HQ, Assembly Plant, Call Center, etc.).
The Purchasing Organization is the legally responsibly group for external transactions. This group is
further subdivided into Purchasing Groups.

2. Describe the term Client in brief? OR What is the term Client in SAP system?

A: The client is a unit within an SAP system that is self-contained both in legal and organizational terms
and in terms of data, with separate master records and an independent set of tables. From a business
viewpoint, the client represents a corporate group, for example.
The client is the highest hierarchical level in the SAP system. Specifications or data that you make and
enter at this level apply to all company codes and all other organizational units. Therefore, you do not
have to enter the specifications and data at client level more than once in the system. This ensures a
uniform data status.
Access authorization is assigned on a client-specific basis. A user master record must be created for
every user in the client in which he or she wishes to work. If the Client field has not been pre-populated,
each user must specify a client key when logging onto an SAP system. In this way, the user specifies
the client in which he or she wishes to work. All user input is stored, separated by client. The processing
and evaluation of data is likewise carried out on a client-specific basis.
A client is uniquely defined in the system by a three-digit numeric key.

3. Describe the term Company Code in brief? OR What is the term Company Code in
SAP System?

A: The company code is the smallest organizational unit of external accounting for which a complete,
self-contained bookkeeping system can be replicated. This includes the entry of all events that require
posting to the accounts and the creation of a complete audit trail for balance sheets and profit and loss
statements. A company code represents an independent unit producing its own balance sheet, for
example, a company within a corporate group (client).
You can set up several company codes in one client in order to thus keep separate sets of financial
books. You can use a special Customizing function to copy a company code. In the process, company-
code-dependent specifications are adopted for your new company code.
A company code is defined in the system by means of a four-character alphanumeric key that is unique
in the client.

4. Describe the term Plant in brief? OR What is the term Plant in SAP system?

A: The plant is an organizational unit within logistics that subdivides an enterprise from the viewpoints of
production, procurement, and materials planning.
A plant may represent a variety of entities within a firm, such as:
Production facility
Distribution center
Regional sales office
Corporate headquarters
Maintenance location
When creating a new plant, you can use the plant copy function. In the process, all entries in the plant
table and all Customizing and system tables that depend on it, and in which the plant occurs as the key,
are taken into account. A plant is defined in the system by means of a four-character alphanumeric key
that is unique in the client.

5. Describe the term Storage Location in brief? OR What is the term Storage
Location in SAP system?

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A: The storage location is an organizational unit that facilitates the differentiation of stocks of materials
within a plant. Inventory management on a quantity basis is carried out in the plant at storage location
level. The physical inventory is also carried out at this level.
A storage location is defined by means of a four-character alphanumeric key that is unique in the Plant.
Several storage locations may be assigned to a plant, but a certain storage location can only belong to
one plant only. Storage locations are defined especially for a plant and are thus assigned to this plant.
The key of a storage location need only be unique within a plant. Within a client, the same key can be
used for different storage locations, since when you specify a storage location you always have to
specify the plant too.

6. Describe the term Purchasing Organization in brief? OR What is the term

Purchasing Organization in SAP system?

A: The purchasing organization is an organizational unit within logistics that subdivides the enterprise
according to the purchasing requirements. A purchasing organization procures materials or services,
negotiates conditions of purchase with vendors, and assumes responsibility for these transactions.
You can incorporate purchasing into the company structure by assigning the purchasing organization to
a company code and to plants. This means that you can take into account whether purchasing is
organized on a centralized or decentralized basis in your company. You can have a combination of
these two organizational forms.
You can assign several purchasing organizations to one company code. However, a certain purchasing
organization can only belong to one company code. You can decide not to assign the purchasing
organization to a company code (cross-company-code purchasing). There is an m: n relationship
between purchasing organizations and plants. In other words, you can assign several plants to one
purchasing organization, and one plant to several purchasing organizations.

7. What are the different ways to organize purchasing organizations?

A: The different assignment options between company code, plant, and purchasing organization yield the
following categories of purchasing organization.

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Plant-specific procurement: In plant-

specific procurement, a purchasing
organization is responsible for procuring
materials for just one plant.
Assign just one plant of the company code to
this purchasing organization under
Assignment Materials Management
Assign purchasing organization to plant.

Cross-plant purchasing organization: If a

purchasing organization is to procure
materials and services for several plants
belonging to a company code, you can set
up a cross-plant purchasing organization
within the company code. To do so, you
assign the purchasing organization to the
desired company code. After this, you assign
the plants for which the purchasing
organization is to be responsible.
Cross-plant purchasing is also known as
Company-specific purchasing.

Cross-company-code purchasing: If you

want to set up cross-company-code
purchasing, you must not assign the
purchasing organization to any company
code(s) in Customizing. Then, when you
create a purchase order, the system will ask
you to enter the company code for which you
want to procure the material.
Cross-company-code purchasing is also
known as Corporate-group-wide purchasing.

8. What is valuation level/area & which are possible valuation levels in SAP?

A: The Valuation Level is the level at which material stocks are valuated.
The material stocks are valuated at the following levels:
1. Plant Level 2. Company Code Level
When stock is valuated at plant level, you can valuate a material in different plants at different
prices.
When you valuate stock at company code level, the valuation price of a material is the same in
all of a company's plants (that is, in a company code).

9. How the choice of valuation level affects in SAP System?

A: Choice of valuation level affects the following:

Maintenance of material master records: Depending on the valuation level chosen,
accounting data (in particular the valuation price) is maintained for each plant or for each
company code in the material master record.
G/L accounts in which material stocks are managed:
o If material stocks are valuated at company code level, all plant stocks of a material are
managed in a joint stock account for each company code.
o If material stocks are valuated at plant level, the material stocks for each plant can be
managed in different accounts. You can define a separate account determination for
each plant.
If several plants are to use account determination, you can group them together in
Customizing for Valuation and Account Assignment in the section Account
Determination.

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G/L accounts to which transactions are posted in Materials Management.

10. What role is played by a Plant level in SAP system organization?

A: The plant plays an important role in the following areas:

Material valuation: If the valuation level is the plant, the material stocks are valuated at
plant level. If the valuation level is the plant, you can define the material prices for each
plant. Each plant can have its own account determination.
Inventory management: The material stocks are managed within a plant.
MRP: Material requirements are planned for each plant. Each plant has its own MRP data.
Analyses for materials planning can be made across plants.
Production:
Costing: In costing, valuation prices are defined only within a plant.
Plant maintenance: If a plant performs plant maintenance planning tasks, it is defined as
a maintenance planning plant. A maintenance planning plant can also carry out planning
tasks for other plants (maintenance plants).

11. While creating new plant, which plant is copied? Why it is recommended by
SAP to copy existing plant than to create new plant?

A: While creating new plant, existing plant 0001 is recommended to copy.

Plant 0001 is already preset in all dependent tables. SAP recommends that you change only
the attributes and not this number. For further settings, this enables you to access the sample
entries, considerably reducing the time required for maintenance. To create new plants, use
the Extended Copier to make copies of Plant 0001.

12. What is a storage Location? What are general attributes of a Storage

Location in SAP system?

A: A storage location is the place where stock is physically kept within a plant.
A storage location has the following attributes:
There may be one or more storage locations within a plant.
A storage location has a description and at least one address.
It is possible to store material data specific to a storage location.
Stocks are managed only on a quantity basis and not on a value basis at storage
location level.
Physical inventories are carried out at storage location level.
A storage location can be assigned to a warehouse number in the Warehouse
Management System. You can assign more than one storage location to the same
warehouse number within a plant.
Storage locations are always created for a plant.

13. What are general attributes of a Purchasing Organization in SAP system? OR

How the purchasing organization is integrated within the organizational
structure in SAP system?

A: The purchasing organization is integrated within the organizational structure as follows:

A purchasing organization can be assigned to several company codes.
A purchasing organization can be assigned to one company code.
A purchasing organization can also exist without being assigned to a company code.
Since each plant must be assigned to a company code, the latter can be determined
via the plant at the time of each procurement transaction even if the procuring
purchasing organization has not been assigned to a company code.
A purchasing organization must be assigned to one or more plants. (Plant-specific
purchasing).

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A purchasing organization can be linked to one or more other purchasing organizations.

A purchasing organization can be divided into several purchasing groups that are
responsible for different operational areas.
Each purchasing organization has its own info records and conditions for pricing.
Each purchasing organization has its own vendor master data.
Each purchasing organization evaluates its own vendors using MM Vendor Evaluation.
Authorizations for processing purchasing transactions can be assigned to each
purchasing organization.
All items of an external purchasing document, that is, request for quotation, purchase
order, contract, or scheduling agreement, belong to a purchasing organization.
The purchasing organization is the highest level of aggregation (after the organizational
unit "client") for purchasing statistics.
The purchasing organization serves as the selection criterion for lists of all purchasing
documents.

14. What is the term Standard Purchasing Organization?

A: If several purchasing organizations procure for a certain plant, you can define one of them as
the standard purchasing organization for the transactions "pipeline procurement",
"consignment" and "stock transfers".
In source determination for stock transfers and consignment, the system automatically utilizes
this standard purchasing organization. In the case of goods issues of pipeline materials, the
purchasing info records of the standard purchasing organization are read.

15. In which situation the assignment of Purchasing Organization to Reference

Purchasing Organization is done?

A: In this step, you can make the appropriate settings to enable the purchasing staff of your
enterprise to work with conditions and contract release orders on a cross-purchasing-
organization basis.
It is then possible for:
I. The conditions of a reference purchasing organization to be used by other purchasing
organizations for the purpose of price determination.
II. Several purchasing organizations to access the contracts of a certain reference
purchasing organization.
You can assign several purchasing organizations to one reference purchasing organization,
but each individual purchasing organization should be assigned to just one reference
purchasing organization.

16. What is a Purchasing Group?

A: Purchasing Group is a key for a buyer or group of buyers responsible for certain purchasing
activities.
The purchasing group is:
I. Internally responsible for the procurement of a material or a class of materials.
II. Externally the principal channel for a company's dealings with its vendors.
The purchasing group is not aligned to other units in the company structure. Purchasing
groups are not defined in Customizing for the Enterprise Structure, but in Customizing for
Materials Management Purchasing Create Purchasing Groups.

17. Which are the IMG activities/steps/transactions involved in designing

Enterprises Structure for MM Module in SAP Module? What are T-codes for
each step?

A: Following IMG activities/steps are involved for Enterprises Structure for MM module in SAP
system:

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Sr. IMG Path

Activity T-Code
No. (SPRO SAP ref IMG Enterprise Structure )

1 Define Company Definition Financial Accounting Define Company. ----

Definition Financial Accounting Edit, Copy, Delete,

2 Define Company Code EC01/OX02
Check Company Code.
Assign Company code to Assignment Financial Accounting Assign Company
3 OX16
company Code to Company.

4 Maintain Controlling Area Definition Controlling Maintain Controlling Area. OX06

Assign Company Code Assignment Controlling Assign Company Code to

5 OX19
to Controlling Area Controlling Area.

6 Define Valuation Level Definition Logistics General Define Valuation Level. OX14

Definition Logistics General Define, Copy, Delete,

7 Define Plant EC02/OX10
Check Plant
Assign plant to Company Assignment Logistics General Assign Plant to
8 OX18
Code Company Code
Maintain Storage Definition Materials Management Maintain Storage
9 EC14/OX09
Locations Location
Maintain Purchasing Definition Materials Management Maintain Purchasing
10 EC13/OX08
Organization Organization
Assign Pur. Org to Assignment Materials Management Assign Purchasing
11 OX01
Company Code Organization to Company Code
Assignment Materials Management Assign Purchasing
12 Assign Pur. Org to Plant OX17
Organization to Plant
Assign Std. Pur. Org to Assignment Materials Management Assign Standard
13 -----
Plant Purchasing Organization to Plant
Assign Pur. Org to Assignment Materials Management Assign Purchasing
14 -----
Reference Pur. Org. Organization to reference Pur. Org
Create Purchasing SAP ref IMG Materials Management Purchasing
XX -----
Group Create Purchasing Group

SAP MM QUESTIONS & ANSWERS Created By ANIL PATIL