Sales and purchasing units

Sales and purchasing each have their own organizational units. They sit on top of the plants and company codes you already know, and the assignments between them decide which combinations are allowed. Many test failures that look like bugs are really missing assignments.

Sales organization

The sales organization is responsible for selling: it negotiates terms, carries liability for the products sold and is the top unit in sales reporting. Each sales organization is assigned to exactly one company code, so revenue from its sales posts to that company code. Contoso sells through sales organization 1710, assigned to company code 1710.

Distribution channel and division

The distribution channel is the route by which products reach customers, such as direct sales, dealers or online. The division groups products or services, often a product line. Contoso uses distribution channel 10 (direct sales) and division 00 (a cross-product division that covers all its products).

The sales area

A sales area is the combination of sales organization, distribution channel and division. Every sales document belongs to exactly one sales area, and customer master data is maintained per sales area, with its own payment terms, pricing and shipping settings. Contoso’s main sales area is 1710 / 10 / 00.

Plants are linked to sales through the combination of sales organization and distribution channel. Only plants assigned to that combination can be used as delivering plants on its orders. A shipping point is then determined for each delivery from the plant and other settings. Contoso uses shipping point 1710 for the Detroit dock and 1720 for Chicago.

Some companies add optional units inside a sales area: a sales office for a physical branch or region and a sales group for a team of sales people. They are used mainly for reporting and responsibility, and they do not change which company code or plant is used. Contoso does not use them yet, but you will see the fields on sales documents.

Reading a sales order’s org units

Open any Contoso sales order and you can find the whole structure. The header shows the sales area (1710 / 10 / 00). Each item shows its delivering plant, 1710 or 1720. The shipping data shows the shipping point determined for the item. When the order is delivered and billed, the billing document carries company code 1710, derived from the sales organization, and the journal entry lines carry the profit center and segment. Five minutes spent reading one real document this way teaches the structure better than any diagram.

Purchasing organization

The purchasing organization procures materials and services and negotiates conditions with suppliers. It is assigned to the plants it buys for, and optionally to one company code. Three common designs are:

Contoso uses purchasing organization 1710, assigned to company code 1710 and to both plants 1710 and 1720. A purchase order can only name a plant that is assigned to its purchasing organization.

Purchasing group

The purchasing group is a buyer or a team of buyers responsible for certain materials or activities. Unlike the other units, it is not assigned to a plant or company code; it identifies who is responsible. At Contoso, Luis works in purchasing group 001 for electrical components.