Materials management helps to control and execute procurement activities and inventory management.
The organizational structure has four organizational units: plant, storage location, purchasing organization, and purchasing group. The figure below shows the materials management organizational structure.
Let’s explore the organizational units in materials management in detail.
A storage location is a specific physical location within a plant where inventory is stored and managed. It serves as a subdivision of the plant and plays a vital role in inventory management and warehouse management. A storage location is used to track stock levels of materials and to track material movements within a plant and across plants. By using the storage location in SAP, materials can be easily traced within a plant. Entering a storage location is mandatory for any material movement transaction in inventory management and warehouse management.
To maintain a storage location within a plant, execute Transaction SPRO and navigate to Enterprise Structure > Definition > Materials Management > Maintain Storage Location.
The next figure shows that storage locations MJ00 and MJ01 are maintained within plant MJ00. Click New Entries to maintain a new storage location or copy an existing storage location to edit it. Define a four-character unique alphanumeric or numeric key for the storage location.
Fill in the following fields:
Note: If you maintain the address of the storage location, it takes precedence over the plant address in the purchase order, and the storage location address will become the delivery address for the purchase order item.
A purchasing organization is a crucial part of the materials management organizational structure, responsible for procuring goods and services for the organization. The purchasing organization maintains relationships with suppliers; collaborates with suppliers; maintains purchasing master data including pricing conditions, Incoterms, and payment terms; and ensures that the right materials are available at the right time for various functions of the organization such as production, maintenance, sales, and so on.
In the following sections, we’ll walk through the definition and assignment of purchasing organizations.
To maintain a purchasing organization, execute Transaction SPRO and navigate to Enterprise Structure > Definition > Materials Management > Maintain Purchasing Organization.
The next figure shows purchasing organization MJ00. Click New Entries to maintain a purchasing organization or copy an existing purchasing organization to edit. Define a four-character unique alphanumeric or numeric key for the purchasing organization and enter a description.
A purchasing organization can be plant-specific or company-specific. Best practice is to have a purchasing organization assigned to the company code if the purchase organization type is cross-plant-specific. If your purchasing organization type is plant-specific, assign the purchasing organization to the plant. If the purchasing organization is cross-company-code-specific, assign the purchasing organization to the plant and do not assign it to company codes. If a purchase organization is assigned to one company code, it is called a company-specific purchasing organization. You can assign one purchasing organization to one or more company codes.
To assign a purchasing organization to company code(s), execute Transaction SPRO and navigate to Enterprise Structure > Assignment > Materials Management > Assign Purchasing Organization to Company Code.
The figure above shows that multiple company codes are assigned to purchasing organization MJ00. Directly specify the company code to assign it to the purchasing organization in the CoCd (company code) field.
If you don’t choose to assign a purchasing organization to the company code, you can assign a purchasing organization to one or more plants. If a purchase organization is assigned to one plant, it is called a plant-specific purchasing organization.
To assign a purchasing organization to one or more plants, execute Transaction SPRO and navigate to Enterprise Structure > Assignment > Materials Management > Assign Purchasing Organization to Plant.
The next figure shows that multiple plants are assigned to purchasing organization MJ00. To assign a plant to the purchasing organization, click New Entries and specify the plant and purchasing organization.
A purchasing group is a subdivision of a purchasing organization, responsible for specific purchasing activities or managing purchasing activities for a specific or multiple product categories. Purchasing groups can have the responsibility of managing procurement activities for a specific region or multiple regions. Purchasing groups are typically assigned to an individual or a group of buyers. Purchasing group information such as contact details are provided to vendors via purchase orders or outline agreements.
To create purchasing groups, execute Transaction SPRO and navigate to Materials Management > Purchasing > Create Purchasing Groups.
The figure below shows purchasing groups 001, 002, and 003. Click New Entries to create a new purchasing group or copy an existing purchasing group to edit. Define a three-character unique alphanumeric or numeric key for the purchasing group and enter a description.
You can maintain the telephone numbers, fax numbers, and email addresses of all purchasing groups. Best practice is to share contact details with suppliers by displaying the details of the purchasing group in the purchase order.
Editor’s note: This post has been adapted from a section of the book Integrating Materials Management in SAP S/4HANA by Murthy KP. Murthy is a senior manager at Deloitte with a focus on supply chain and intelligent spend management. He has more than 16 years of SAP experience delivering complex supply chain transformation projects enabled by SAP S/4HANA and SAP Ariba.
This post was originally published 7/2025.