Let’s understand concept of enterprise structure with an example.
Example: House (consider functioning of a house)
Guests are chaired in hall. Material is stored in store room. Food is cooked in kitchen. Bath is done is bathroom. Cloths are washed in washing machine kept in dry area. Balcony is to provide fresh air and drying cloths.
Hence a house is composed of below units:
Hall / store room / kitchen / bathroom / dry area / balcony
For effective functioning of a house, all these units need to be put together and interlinked in a specific way. This is an example of house structure. Here structure represents the specific way in which there units are interlinked with each other to make a house function effectively.
Each house may have different arrangement of these units hence each house can have different structure.
Now let’s apply the same concept and understand enterprise structure.
Functioning of an enterprise or organization
Sales department might have multiple sales representative scattered across geography. Purchase department might be divided into multiple groups with responsibility of specific purchase. Purchasing department procures raw material from vendor and store it in storage. Using raw material finished goods are manufactured at manufacturing site. Manufactured finished good are stored at a location for sale. Goods for sale are dispatched from a specific location.
A company might have several affiliates. Each affiliate is independent legal unit hence finance department has to prepare balance sheet and profit & loss statement for each affiliate separately. For balance sheet and profit & loss statement of Group Company, finance department has to consolidate financial data of all affiliates.
Sap is supposed to replicate business and fulfill business requirements.
To enable effective functioning of enterprise/ organization, above organizational units are interlinked in a specific way. This interlinking of organizational units in a specific way is referred as enterprise structure.
Below picture represents enterprise structure in sap.
SAP ENTERPRISE STRUCTURE
When sap is implemented in an organization, enterprise structure is decided and created as per business requirement.
Below picture depicts how business units are represented as organizational units in sap.