SAP Tutorial - The Building Blocks

SAP Architecture

To be understood by you clearly, I have kept it simple. SAP has got three-tier architecture, as described below:

•    Presentation Layer
•    Application Layer
•    Database Layer

Presentation Layer – This is where you will be every day while working in SAP. It may be a desktop based graphical user interface or a web based UI. No Matter what the form, its work is to get you connected to the Application Layer and through that to underlying Database Layer.

Application Layer – These are programs which perform specific tasks or operations and are grouped together in the component area (eg Material Management, Sales and Distribution). It contains applications delivered by SAP AG as well as any Customized Program developed by your implementation Partner.

Database Layer – This is where the data is stored in form of table records. It is a relational database of your choice. SAP gives you freedom to choose the database platform.

Having described the SAP Architecture in a nutshell, now let us proceed towards doing the First Highly Critical Task of mapping the organization in SAP.  This is a very crucial activity and it should be completed as soon as possible. Basically you are creating your business’s organization structure from business process perspective. Each organization which is mapped in SAP is referred to by its ORGANISATION STRUCTURE IN SAP. 

This is the most basic Building Block on which you will later build and map all your business processes. Each Organization Structure (whether in real life or in SAP) has got certain basic Elements, so what we are required to do here is map the business’s building blocks into SAP at a higher level. Let’s go into detail with help of some examples.

In Business you have a company (having its registration number) for which you create Profit & Loss Statement and Draw a Balance Sheet at the end of Financial Year. So the company is a building block on the very top. Under this company you may have a Sales Department, Purchase Department, Production Department, and Accounts Department. Let us drill down further into Sales Department and may be you have different Channels of Sales, Different Brands which you manufacture or sell, and in order to reach your customer you have created a hierarchy of elements like a Sales Depot, A Sales Office, A Salesman etc. All of these are elements in your organisation’s business process map. Now if you are asked to create an organization structure for mapping in SAP, be overly cautious and described your organization in as much detail as possible from process perspective. It will help the consultants in drawing up an Organization Structure for you in SAP. Some of the elements used in SAP Organisation Structure are given below for your reference.

Organisation Structure in SAP

Some of key elements within SAP Organization Structure are listed below, please remember this is not an exhaustive list, it represents the most basic and required elements only.

• Client – A Legally and organizationally independent Unit. This is the top most entity in SAP at which data can be recorded. It is a partition of data in database so you can multiple instances of same tables belonging to different Clients. When SAP is installed, 3 clients  are created in the database by default, these are 000, 001, and 066. These are client tables are populated by SAP with some basic configuration data which can be copied and altered to suit the business needs. Client 000 contains basic configuration settings, Client 001 has got some test data and Client 066 is used by SAP for early watch alerts of your systems.
• Company – The Group Company, if any, where consolidation of different legal units is done.
• Company Code - Lowest Legal Entity for which accounting is done.
• Business Area – A Sub unit for which separate books of account may be needed
• Profit Centres – Used for generating Profit Reports.
• Cost Centres - To record expenses in proper heads for reporting purpose
• Sales Organization – A hierarchical representation of your sales channels. In SAP, sales organization comprises of following sub-elements.
• Distribution Channel – The avenues of sales eg, Distribution, Retail, Export, Institutional etc. This is a mandatory element.
• Sales Division – This is basically the classification of goods sold at top level, it could be a brand or it could be product category, you have to choose carefully as the data entry in sales module and reporting will be dependent on this element. This too is a mandatory element.
• Sales Offices – Optional Elements, primarily used for reporting. Use them if you have sales offices in different cities or geographies.
• Sales Groups – Optional Element, here you can define different Group of Sales people, mainly used for reporting purpose.
• Sales Area – Grouping of Sales Organization, Distribution channel and Division in such a way that you can control which channel can sell what. So it is basically a derived element which controls the type of sales that can be done a customer or a group of customers.
• Plant – It is an operational unit within the company, it can be a manufacturing unit or it can be a warehouse.
• Storage Locations – Logical Partitions within the plant where you can store materials. A plant can have multiple Storage Locations.
• Purchasing Organization – it is a basic element which records all purchase transactions within SAP, a purchase organisation can cater to multiple sales organisations within the company.  For example you have 2 very distinct lines of sales businesses, one sells consumer products and the other sells cars, both of these sales lines belong to the same company and you have only one purchasing department which buys raw material as well as finished goods for both of these sales lines so in sap you will have one purchase organisation. Purchase organisation can be mapped to a client, or to plant or it could be a cross company entity
• Purchasing Group – Key for a buyer or a group of buyers, who is/are responsible for certain purchasing activities. You can use it internally as the group responsible for the procurement of a material or a class of materials or if used externally, it is the medium through which contacts with the vendor are maintained.

We are now finished with describing the Building Blocks. In the Next Session I will give you example from one of my implementations.

Organization Structure Examples....

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