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Having started from scratch - I have been trying to delve in the world of SAP S/4 HANA and Sales and Distribution.

On one hand Information on S/4 Modules are widely available at the same time it can become very overwhelming and tedious to navigate through all the various content available and form your own understanding of topics. So with this series (Demystify SD) I hereby share my learning on some key topics in the simplest way possible for anyone taking up interest in the SD Module or Sales Processes in general.

Have a good read!


Issue #1

Key Terms :

Organizational Unit

Organizational Unit in SAP terms represents Structure of a Company. In other words, they correspond to the legal and/or organizational units of an enterprise. SAP provides organizational units for all areas of your company (such as accounting, purchasing, production, and warehousing). We will focus on the elements that are relevant for sales and distribution processes.

  1. Company Code

  2. Sales Area

    1. Sales Org

    2. Distribution Channel

    3. Division

  3. Distribution

    1. Plant

    2. Storage Location

  4. Shipping Point

1. Company Code

  • The smallest organizational unit and a legal entity

  • A unit for which a complete and self-contained set of accounts can be drawn up for purpose of external transactions


  • Why is this relevant ? Eg : revenues of Sales Department are assigned to the Company Code

2. Sales Area

  • A combination of one Sales Org, one Distribution Channel and one Division

  • It charts the entire distribution channel a company is using to sell a product to a certain division

  • Each Sales Doc - assigned to - exactly one sales area. This assignment cannot be changed

2.1 Sales Org

  • To establish a SD system - you need at least ONE Sales Org

  • It is the highest summation level in the Sales Statistics

  • All the SD Documents Created - assigned to Sales Org

  • Takes the regional, national or international sub divisions into account

2.2 Distribution Channel

  • It is the channel through which saleable materials or services reach the customer.

  • To establish a Distribution Channel - you need at least ONE Sales Org

  • A distribution channel level is not a data retention level until it has been combined with a sales organization or (later) a division as well.

2.3 Division

  • Organizational unit based on responsibility for sales or profits from saleable materials or services

  • Divisions have two main applications:

    • They are organizational units for Sales and Distribution

    • They are necessary for business area account assignment for logistics transactions in Financial Accounting

  • Divisions can be used to describe specific product groups and can form the basis for sales statistics, for example

  • A method to group materials and services

3. Distribution

3.1 Plant and Storage Location

  • Plant is a location where material stock is kept.

  • Different storage locations can be used to separate the stock within a plant

  • To use SD - you need atleast one PLANT

  • Plant is essential for defining shipping point

4. Shipping Point

  • Shipping Point is highest-level organizational unit of shipping

  • Each outbound delivery is processed by exactly one shipping point

Relation Between Different Org Units :


Sales Area & Company Code

  • A sales area - belong to - ONLY one company code

Sales Org & Company Code

  • Atleast one Sales Org has to be defined in any system

  • Each Sales Org - Uniquely assigned to a company code

  • MANY Sales Org - assigned to - ONE Company

Sales Org & Distribution Channel

  • Distribution Channel has to be assigned to ONE sales org

  • MANY Distri Channel - assigned to - ONE Sales Org

Sales Org & Division

  • Several divisions can be assigned to sales organisation

Plant & Company Code

  • One Plant - uniquely assigned to - Company Code


Hope this analogy helps you clear your foundation on the topic of Organisation Structure.

Breaking the complex jargons did help me as a beginner to wrap my head around the concept and make them relatable.


Hoping this article added some value! 🙂