MM (Materials Management), SD (Sales and Distribution)

Creation of New Plant for an Existing Company Code

From time to time, we’ve to create a Plant for a Company code in order to meet the business requirements. As someone who has a fair bit of knowledge and hands on experience in this topic as I have created, rolled out and implemented multiple plants across various regions in India for my organization, I thought it’d be a good idea to impart my knowledge across the SAP community and also connect with the SAP lovers across the globe.

I’ve tried to be as elaborate as possible in order to simplify for the beginners by giving the theoretical explanation to each of the Organizational Unit and the steps involved with the screenshots.

Read More: SAP MM Certification Preparation Guide

1. Introduction

This document aims to cover the configuration aspect of the following modules: FI (Finance), MM (Material Management), PP (Production Planning) and SD (Sales and Distribution). This document does not cover any transactional details nor the topic relevant to PM (Plant Maintenance), HCM (Human Capital Management) modules in SAP.

2. Enterprise Structure – Definition

2.1. Logistics General

2.1.1. Define Valuation Level (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Logistics general ⇒ Define Valuation Level or T Code: OX14

In Valuation level, we specify the level at which material stocks are valuated. Valuation can either be at Plant level or Company code level but not both. We have used the Plant level since the application component Production Planning (PP) and Costing are being used.

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. 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. If material stocks are valuated at plant level, the material stocks for each plant can be managed in different accounts. We can define a separate account determination for each plant.

As shown in the message below “The Valuation level cannot be maintained (already defined)”, Valuation Level cannot be changed to Company code once it is defined as Plant or vice versa.

2.1.2. Define Plant

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Logistics general ⇒ Define, copy, delete, check plant

The ‘Plant’ is an operating area or a branch or a location within a company.

The plant is embedded in the organizational structure as follows:

• The plant is assigned to a single company code. A company code can have several plants.
• Several storage locations in which material stocks are managed can belong to a plant.
• A single business area is assigned to a plant and to a division.
• A plant can be assigned to several combinations of sales organization and distribution channel.
• A plant can have several shipping points. A shipping point can be assigned to several plants.
• A plant can be defined as a maintenance planning plant.

A plant has the following attributes:

• It has an address.
• It has a language.
• It belongs to a country.
• It has its own material master data. You can maintain data at plant level for the following views on a material master record in particular: MRP, Purchasing, Storage, Work scheduling, Production resources/tools, Forecasting, Quality management, Sales & Costing.

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 and 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: Master Data like Bill Of Material, Routing, Work Center etc.
• 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).

As we are creating a New Plant and assigning to an existing Company Code, we can either create the Plant using “New Entries” or “Copy Function”

Mention the Required Details as shown below and Save­­

2.1.3. Define Division (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Logistics general ⇒ Define, copy, delete, check Division

This is an optional step because depending on the business scenario, it may or may not be required to create a new Division while creating a new Plant.

The division is one of the organizational units which is also required for business area account assignment for logistics transactions in Financial Accounting. The business area for the material is determined via the plant and the division defined in the material master record.

In order to adapt the functional scope of a division to the organization in your company, you should process the following check list:
• Allocate a division to one or more sales organizations.
• Allocate a division to one or more distribution channels.
• Allocate a business area to a division from a plant. Hence, business area account assignment can be carried out using from the division and the valuation area for transactions in Materials Management.
• A material is always assigned to one division only. You specify the division on the first sales & distribution screen in the material master record.
• You can define your own master data within a division for customers as well as your own conditions and pricing.
• You can also create shared customer master data and conditions, which apply to several divisions, using a common division.
• You can define sales offices for a division.
• You can define for each sales document type that all items of a sales document must belong to the same division.
• The items of a delivery or a billing document can belong to different divisions.
• The division is used as a selection criterion for lists of sales documents and the work list for deliveries.
• You can determine the printer destination for messages differently for every division on the basis of the sales documents.

Mention the Division and save.

2.2. Sales and Distribution Channel

2.2.1. Define Sales Organization (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Sales and Distribution Channel ⇒ Define, copy, delete, check Sales Organization

This is an optional step because depending on the business scenario, it may or may not be required to create a new Sales Organization while creating a new Plant.

Definition: The sales organization is an organizational unit within logistics, that structures the company according to its sales requirements.

Use: A sales organization is responsible for the sale and distribution of goods and services. It represents the selling unit as a legal entity. It is responsible for product guarantees and other rights to recourse, for example. Regional subdividing of the market can also be carried out with the help of sales organizations. Each business transaction is processed within a sales organization. The sales organization must be specified in all sales documents. It is therefore available for all basic functions of SD (such as pricing, availability, etc.).

Structure: A sales organization can be subdivided into several distribution chains which determine the responsibility for a distribution channel. Several divisions can be assigned to a sales organization which is responsible for the materials or services provided. A sales area determines which distribution channel can be used to sell the products from one division in a sales organization.

Integration: Each sales organization is assigned exactly one company code for which you enter all accounting details of the sales organization. A distribution chain can be active for several plants and the plants can be assigned to different company codes. If the sales organization and plant are assigned to different company codes, an internal billing document is sent between the company codes before the sales transactions are entered for accounting purposes.

“New Entries” or “Copy Function” can be used to create a new Sales Organization.

Mention the required data and Save.

Enter the required address and save.

2.2.2. Define Distribution Channel (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Sales and Distribution Channel ⇒ Define, copy, delete, check Distribution Channel

This is an optional step because depending on the business scenario, it may or may not be required to create a new Distribution Channel while creating a new Plant.

Definition: The distribution channel represents the channel through which salable materials or services reach customers. Typical distribution channels include wholesale, retail and direct sales.

Use: Within a sales organization a customer can be supplied through several distribution channels. In addition, the material master data relevant for sales, such as prices, minimum order quantity, minimum quantity to be delivered and delivering plant, can differ for each sales organization and distribution channel.

Structure: A single distribution channel can be assigned to one or more sales organizations and Plants.

“New Entries” or “Copy Function” can be used to create a new Distribution Channel. Maintain the required details and save.

2.2.3. Maintain Sales Office (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Sales and Distribution Channel ⇒ Maintain Sales Office

This is an optional step because depending on the business scenario, it may or may not be required to maintain new Sales Office while creating a new Plant.

Sales office definition is an optional activity, you can run SD transaction without a sales office. It’s used to manage the sales in a particular region based mainly a geographical area. It is one of sales organizational units in SAP SD that enable to map a real-life enterprise structure to the SAP representation of a company.

“New Entries” or “Copy Function” can be used to create a new Sales Office. Entered the required data

Enter the required address details of each Sales Office and Save.

2.2.4. Maintain Sales Group (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Sales and Distribution Channel ⇒ Maintain Sales Group

This is an optional step because depending on the business scenario, it may or may not be required to maintain new Sales Group while creating a new Plant.

Sales Group is the group of Sales Person working for various purposes. It is mainly used to manage work force. It can be assigned to the Sales Office and multiple Sales Groups can be assigned to one Sales Office.

Enter the Sales Group and it’s description.

2.3. Material Management

2.3.1. Maintain Storage Location

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Material Management ⇒ Maintain Storage Location

A storage location is the place where stock is physically kept within a plant. It allows you to differentiate between various types of stock in a site. There may be one or more storage locations within a plant. It has the following attributes:
• 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.

Enter the newly created Plant for which Storage Location has to be created.

Select “New Entries”

Enter the required Storage Locations

In order to enter the address of the Storage Location, Select the Storage Location and click on “Addresses of Storage Locations”.

Enter a new Sequential Number and press enter.

Enter the required details for the address and save. Similarly, addresses of other storage location can be entered.

2.3.2. Maintain Purchase Organization (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Material Management ⇒ Maintain Purchase Organization

This is an optional step because depending on the business scenario, it may or may not be required to maintain new Sales Group while creating a new Plant.

The Purchasing Organization is responsible for all purchasing activities like processing of requests for quotations and purchase orders, contracts, etc. After the organizational unit “Client”, it is the highest level of aggregation for purchasing statistics.

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

• A purchasing organization can be assigned to several company codes. (= Corporate-group-wide purchasing).
• A purchasing organization can be assigned to one company code. (= Company-specific purchasing).
• 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).
• A purchasing organization can be linked to one or more other purchasing organizations. (= reference purchasing organization)
• A purchasing organization can be divided into several purchasing groups that are responsible for different operational areas.

Purchasing Organization has the following attributes:

• 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.

“New Entries” or “Copy Function” can be used to create a new Purchase Organization.

Enter the required details.

2.3.3. Create Purchase Groups (Optional)

Path: SPRO ⇒ Material Management ⇒ Purchasing ⇒ Create Purchasing Group

A purchasing group corresponds to a buyer or group of buyers who perform the following purchasing activities like Procuring certain articles or merchandise categories and Acting as the contact for vendors to name a few.

“New Entries” or “Copy Function” can be used to create a new Purchasing Group.

Enter the required details and save.

2.4. Logistics Execution

2.4.1. Maintain Shipping Point

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Logistics Execution ⇒ Define, copy, delete, check Shipping Point

In order to adapt the functional scope of a shipping point to the organization in your company, you should process the following check list:
• The shipping point is the top level in the organization for shipping.
• It can be allocated to several plants.
• It can be divided into several loading points.
• A delivery is always initiated from exactly one shipping point. Thus, all items of a delivery belong to one shipping point. Groups of deliveries also belong to exactly one shipping point.
• You can influence delivery scheduling via allocation to departure zones.
• The shipping point can be proposed automatically during order processing depending on the plant, loading group and shipping condition.
• Smart forms can be maintained for each shipping point
• You can determine the printer destination for messages differently for every shipping point on account of shipping documents.

Define the required shipping point along with the other details as shown below.

Enter the address and save.

2.4.2 Maintain Loading Point (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Logistics Execution ⇒ Maintain Loading Point

Enter the Shipping Point created in the previous step to proceed.

Mention the required details and save

3. Enterprise Structure – Assignment

3.1. Logistics General

3.1.1. Assign Plant to Company Code

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Logistics general ⇒ Assign Plant to Company Code

A Plant needs to be assigned to one of the Company Codes, the relation is always one to one i.e. One Plant can be assigned to only one company code.

“New Entries” or “Copy Function” can be used to assign the Plant to Company Code.

Enter the required Company code and the plant.

3.1.2. Assign Business Area to Plant / Valuation Area and Division

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Logistics general ⇒ Assign Business Area to Plant / Valuation Area and Division

This is done to enable automatic business area account assignment.

Combination Plant – Division: The System uses the plant and the division to find the relevant business area for account assignment for revenue postings (SD).

Combination Valuation Area – Division: The ERP system uses the valuation area and the division to find the relevant business area for account assignment when material postings are made (e.g. goods movements in Inventory Management, invoice receipts in Invoice Verification).

Read More: SAP SD Certification Preparation Guide

In our case, Allocation for Plants and Valuation Areas are identical, hence, we’ll choose the second option and select “Plant / Valuation Area – Division”

“New Entries” or “Copy Function” can be used to perform the assignment.

Enter the required details and save.

3.2. Sales and Distribution

3.2.1. Assign Sales Organization to Company Code

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Sales and Distribution Channel ⇒ Assign Sales Organization to Company Code

This establishes a link between the SD and FI systems. A sales organization belongs to just one company code.

Perform the assignment between the relevant Sales Organization and the Company Code.

3.2.2. Assign Distribution Channel to Sales Organization

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Sales and Distribution Channel ⇒ Assign Distribution Channel to Sales Organization

Many to Many relationship is possible between Sales Organization and Distribution Channel

“New Entries” or “Copy Function” can be used to perform the assignment.

Make the required entries with the new Sales Organization and the Distribution Channels.

3.2.3. Assign Division Channel to Sales Organization

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Sales and Distribution Channel ⇒ Assign Division to Sales Organization

Many to Many relationship is possible between Sales Organization and Division.

“New Entries” or “Copy Function” can be used to perform the assignment.

Enter the relevant Sales Organization and Division to perform the assignment.

3.2.4. Set up Sales Area

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Sales and Distribution Channel ⇒ Set up Sales Area

Sales area is set up using the combination of sales organization, distribution channel and division.

“New Entries” or “Copy Function” can be used to perform the assignment. Enter the required sales organization, distribution channel and division and Save.

3.2.5 Assign Sales Office to Sales Are

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Sales and Distribution Channel ⇒ Assign Sales Office to Sales Area

Sales area (combination of sales organization, distribution channel and division) is linked to the Sales Office. In this step, you can allocate as many sales offices as desired to the sales areas. Any one sales office can belong to several sales areas at the same time. The sales areas previously defined are automatically proposed as defaults for allocation.

Enter the required Sales Area and the Sales Office to perform the assignment.

3.2.6. Assign Sales Office to Sales Group

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Sales and Distribution Channel ⇒ Assign Sales Office to Sales Group

Enter the required Sales Office and the Sales Group to perform the assignment and save.

3.2.7. Assign sales organization – distribution channel – plant

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Sales and Distribution Channel ⇒ Assign sales organization – distribution channel – plant

Use this step to assign any number of plants to a combination of sales organization and distribution channel. A plant can be assigned more than once.

Enter the required combination of sales organization – distribution channel – plant to make the assignment and save.

3.3. Materials Management

3.3.1. Assign Purchasing Organization to Company Code

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Logistics general ⇒ Assign Purchasing Organization to Company Code

You have the following options:

• You can assign a purchasing organization to one company code. This is company-specific purchasing.
• You can assign a purchasing organization to no company code. This purchasing organization can then procure for all plants assigned to it, irrespective of the company code to which the plant belongs. Since each plant must be assigned to a company code, the company code can be determined via the plant in each procurement transaction, even if the procuring purchasing organization is not assigned to a company code.
• A purchasing organization must be assigned to one or more plants. This is plant-specific purchasing.

Enter the relevant Company Code for the Purchase Organization.

3.3.2. Assign Purchasing Organization to Plant

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Logistics general ⇒ Assign Purchasing Organization to Plant

Here, you assign purchasing organizations to the plants for which they are responsible. You have the following options:

• One purchasing organization procures for one plant. This is plant-specific purchasing.
• One purchasing organization procures for several plants.
• Several purchasing organizations procure for one plant.

Enter the required combination of Purchase Organization(s) and Plant to perform the assignment and save.

3.3.3. Assign Standard Purchasing Organization to Plant (Optional)

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Logistics general ⇒ Assign Standard Purchasing Organization to Plant

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.

Assign the Standard Purchasing Organization to Plant.

3.4. Logistics Execution

3.4.1. Assign Shipping Point to Plant

Path: SPRO ⇒ Enterprise Structure ⇒ Assignment ⇒ Logistics Execution ⇒ Assign Shipping Point to Plant

Select the required Plant and click on “Assign”

Select the relevant shipping point.

Shipping Point is now assigned to the Plant.

Thereby, now completing the configuration for Creation of Plant for an Existing Company Code.

Leave a Reply

Your email address will not be published. Required fields are marked *