Purchasing Organization is an organizational unit in Purchasing of MM module.
Purchasing Organization is an organization unit that has responsibility to company’s purchasing activities, such as create Request For Quotations (RFQ), Contract, Purchase Order (PO), etc. aIt negotiates purchasing conditions (price, discount, term of payment, etc) with vendors. A Purchasing Organization is represented by a client-unique 4-digit alpha-numeric.
A purchasing organization must be assigned to one (in the case of plant-specific purchasing) or more plants.
One plant can have one or more Purchasing Organizations.
A purchasing organization can be assigned to one company code (in the case of company-specific purchasing).
A purchasing organization can’t be assigned to more than one company code. If we want the purchasing organization serves more than one company code, we must not assign the purchasing organization to any company code. But, we assign the purchasing organization to plants that it’s responsible for. Since each plant is assigned to a company code, SAP system will determine the company code from the plant. Since the company code is on the header level of the purchasing documents and the plant is on item level, we need to input the company code for each purchasing document.
A company code can have one or more purchasing organizations.
In an SAP client, we can set the structure of purchasing organizations as:
If several purchasing organizations procure for a certain plant, we 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.
At a certain point of time, there can be only one purchasing condition for a certain material agreed with a certain vendor in a purchasing organization.
We can set that a purchasing organization can use the condition (for the price determination) and contract (for releasing purchase order) of another purchasing organization. For that purpose, we must assign the purchasing organization to a reference purchasing organization whose condition and contract will be used.
Each purchasing organization has its own vendor master data. We can set different data of a vendor for each purchasing organization, such as term of payment, minimum order value, sales person, partner function, etc.
Each purchasing organization evaluates its own vendors using MM Vendor Evaluation.
Purchasing organization is an authorization object, so we can restrict that certain SAP user can perform the purchasing activities for specific purchasing organization only.
Purchasing organization implementation in the real world
If, in a company group, it’s possible to have more than one pricing conditions of a certain material from a certain vendor at a certain point of time (let say, if each company code can negotiate by itself with the same vendor for procuring the same material for a certain period of time, and can deal with the vendor at different price condition), then the company group must have more than one purchasing organization, one for each company code.
If a company group centralizes its purchasing activities, it only needs one purchasing organization. It means that it only has one purchasing condition for a certain material with a certain vendor at a certain point of time.
If, in a company code, it’s possible to have more than one pricing conditions of a certain material from a certain vendor at a certain point of time (let say, if each plant can negotiate by itself with the same vendor for procuring the same material for a certain period of time, and can deal with the vendor at different price condition), then the company code must have more than one purchasing organization, one for each plant.
If a company code centralizes its purchasing activities, it only needs one purchasing organization. It means that it only has one purchasing condition for a certain material with a certain vendor at a certain point of time.
A purchasing organization can serve one or more company codes/plants. For example, the purchasing organization of the company’s headquarter can perform the purchasing activities (create RFQ, contract, PO, etc) for all its subsidiary/plants. The vendor master data proposed by the system in the transactions is the one of headquarter purchasing organization. The conditions will be recorded as the conditions of headquarter purchasing organization.
To get more details on SAP Enterprise Structure, you can buy my e-book (50 pages .pdf file) at SAP Study Materials Store.
The e-book explains in details about the SAP Enterprise Structure (MM and related modules such as FI, Logistics, and SD) Concept and Configuration Guide. Just like other articles on my SAP Study Materials blog, I wrote the e-book in a simple-to-understand way, so you can learn it easily. You don't need to have extensive SAP knowledge and experience to be able to configure the SAP Enterprise Structure, as the e-book start explaining each step with the basic concept behind it. After understanding the concept, the e-book will show the step-by-step configuration with the screen shots.
- Corporate-group-wide purchasing
A purchasing organization is responsible for the purchasing activities of several company codes.
In this case, we must not assign the purchasing organization to any company code. But, we assign the purchasing organization to the plants that it’s responsible for. Since each plant is assigned to a company code, SAP system will determine the company code from the plant. - Company-specific purchasing:
A purchasing organization is responsible for the purchasing activities of just one company code.
In this case, we assign the purchasing organization to one company code only. The purchasing organization can’t purchase for other company code. We also need to assign the purchasing organization to the plants of the specified company code. - Plant-specific purchasing:
A purchasing organization is responsible for the purchasing activities of one plant only.
In this case, we assign the purchasing organization to one plant only. We also should assign the purchasing organization to the company code of the plant. The purchasing organization can’t purchase for other plant.
If several purchasing organizations procure for a certain plant, we 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.
At a certain point of time, there can be only one purchasing condition for a certain material agreed with a certain vendor in a purchasing organization.
We can set that a purchasing organization can use the condition (for the price determination) and contract (for releasing purchase order) of another purchasing organization. For that purpose, we must assign the purchasing organization to a reference purchasing organization whose condition and contract will be used.
Each purchasing organization has its own vendor master data. We can set different data of a vendor for each purchasing organization, such as term of payment, minimum order value, sales person, partner function, etc.
Each purchasing organization evaluates its own vendors using MM Vendor Evaluation.
Purchasing organization is an authorization object, so we can restrict that certain SAP user can perform the purchasing activities for specific purchasing organization only.
Purchasing organization implementation in the real world
If, in a company group, it’s possible to have more than one pricing conditions of a certain material from a certain vendor at a certain point of time (let say, if each company code can negotiate by itself with the same vendor for procuring the same material for a certain period of time, and can deal with the vendor at different price condition), then the company group must have more than one purchasing organization, one for each company code.
If a company group centralizes its purchasing activities, it only needs one purchasing organization. It means that it only has one purchasing condition for a certain material with a certain vendor at a certain point of time.
If, in a company code, it’s possible to have more than one pricing conditions of a certain material from a certain vendor at a certain point of time (let say, if each plant can negotiate by itself with the same vendor for procuring the same material for a certain period of time, and can deal with the vendor at different price condition), then the company code must have more than one purchasing organization, one for each plant.
If a company code centralizes its purchasing activities, it only needs one purchasing organization. It means that it only has one purchasing condition for a certain material with a certain vendor at a certain point of time.
A purchasing organization can serve one or more company codes/plants. For example, the purchasing organization of the company’s headquarter can perform the purchasing activities (create RFQ, contract, PO, etc) for all its subsidiary/plants. The vendor master data proposed by the system in the transactions is the one of headquarter purchasing organization. The conditions will be recorded as the conditions of headquarter purchasing organization.
To get more details on SAP Enterprise Structure, you can buy my e-book (50 pages .pdf file) at SAP Study Materials Store.
The e-book explains in details about the SAP Enterprise Structure (MM and related modules such as FI, Logistics, and SD) Concept and Configuration Guide. Just like other articles on my SAP Study Materials blog, I wrote the e-book in a simple-to-understand way, so you can learn it easily. You don't need to have extensive SAP knowledge and experience to be able to configure the SAP Enterprise Structure, as the e-book start explaining each step with the basic concept behind it. After understanding the concept, the e-book will show the step-by-step configuration with the screen shots.
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