The organizational structure within SAP Business ByDesign defines the hierarchy across all business aspects of an organization. The structure is composed of organizational units that represent divisions, departments, or reporting entities. A company’s organizational structure in ByDesign can reflect the following characteristics of a business:
- The legal hierarchy determines different companies, entities, and locations.
- The financial hierarchy defines how profits and costs are aggregated.
- The reporting line hierarchy displays personnel responsibilities and allows tasks to be forwarded based on hierarchy.
- The functional hierarchy serves as the basis for work distribution as well as forwarding tasks for approval.
Organization units can also contain administrative information such as the unit name and the manager of the organization unit. Most importantly, the company needs to specify what an organization unit is and what it does.
Defining Organizational Units
Definitions are used to specify what an organization unit is. Examples of definitions include cost center, profit center, segment, reporting line unit, and company and business residence. An organization unit can hold multiple definitions at once.
A challenging definition to understand is the definition of a business residence. A business residence represents a geographic location where the business activity is subject to uniform tax processing. Additionally, if material inventory valuation is unique to a location, that location will require the business residence definition to be identified as a unique location that is separate from others. Therefore, a business residence could represent an office, a warehouse, or a campus of multiple buildings. The business residence definition is the most important definition when it relates to supply chain operations. When an organization unit has a business residence, the system automatically creates a site ID. A site is the logistics representation of a business residence and they are found in supply chain processes.
Functions within an Organization Unit
Functions help to integrate an organization unit into a business process. For example, an organization unit can be identified as a sales unit or a purchasing unit. Multiple functions and multiple definitions can be assigned to an organization unit in order to represent their role in the company’s structure.
Guidelines for a Successful Organization Unit Structure
- The highest hierarchy level should have one or more organization units with a company definition. An organization unit with a business residence definition should follow the hierarchy one level down.
- If a segment definition is assigned to an organization unit, that unit requires profit center and cost center definitions.
- A segment is a node that rolls up multiple profit centers for reporting and it should be at a high hierarchy level.
- If an organizational unit has a profit center definition, a business residence definition should be at the same level or below the unit in order to collect profit and losses.
- If a cost center definition is needed, the cost center organization unit should be below the profit center definition.
The organizational structure design, although complex to understand, is at the core of a successful configuration and company set-up in SAP Business ByDesign. The structure needs to be compliant with the system rules and avoid conflicts that can cause reporting and transaction issues as once activated, the structure cannot be easily edited to remediate issues. This is why it is helpful for companies to have an experienced SAP partner such as Rand Group to assist them with the organization structure design and implementation. To learn more about how Rand Group can assist you with SAP Business ByDesign, get in touch with one of our SAP representatives today.