Difference between Sales Area and Sales Organization

Updated May 18, 2018

Sales Area vs Sales Organization

When you're talking about a company, based on which thing should we take?

Is it different company codes for different locations or is it based on the product group?

Sales Organisation is the organisational unit which responsible for the selling of the product, movement of goods to the customer, customer right of course.

Sales Area is the combination of the Sales:
Organisation + Distribution Channel + Division.

Company code of an organisation is the legal entity which has separate Balansheet and profit & loss A/C required by law for the legal purpose so whenever an organisational unit have the different Balance sheet and P/L A/c you can define a company code.

Organisational Structure broadly refers to the way a company follows a set path of systems/hierarchies. Different companies do have different structures and the differences in structures emanate basically from the strategies.

STRUCTURE FOLLOWS STRATEGY

A Company's structure can be mapped in R/3 which would facilitate the flow of information, flow of process and also facilitates workflow in a logical way.

A Sales Organisations structure is based on the Elements of the Organisation which are as follows:

1. Company Code
2. Sales Organisation
3. Distribution Channel
4. Division
5. Plant
6. Shipping POint.

A Company Code is generally created by finance guys and it broadly represents the highest point of the structure.

The relation between Sales Org and Company code is Unique. One Sales Organisation can be assigned to one Company code. Think of one practical situation where in u can Say that Essar is One Group (Client).
Essar Infotech (Company Code), Essar Oil (Company Code).
Essar Oil may have Essar South (Sales Org) and Essar North( Sales Org). You have to remember that Essar SOuth is only assigned to Essar Oil and not Essar Infotech right....

A Combination of Sales Org, Distribution Channel and Division is called a Sales Area and a Sales Area is assigned to the company thru the Sales Org.

A plant is assigned to the company code. It is also assigned to the Sales Org and Dist Channe and this channel is called Delivering Plant.

A Shipping POint is assigned to the CLIENT.

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Comments

10 Jun 2008 10:14 am Guest
Very good explanation sir. may i know where u are working now?

27 Mar 2009 2:59 am Guest
Hi

I was bit confused by this.
Can you please tell me if sales area is assigned through sales organization then how come it is possible that Sales Area is a combination of Sales Organization+ division + distribution Channel

28 Mar 2009 4:22 am Saif Khan
In order to make sales we need atleast one sales area because all the sales activities take place within a Sales Area only. A Sales Area is defined by combining a Sales Organisation, distribution channel and division. Since a Sales organisation is assigned to a Company code, the assignment of a Sales Area to a Company Code is done automatically through the assignment of Sales Organisation to the Company Code.

04 Apr 2009 10:07 am Guest
What happen if we are talking about a MNC like HP.
company code = {Germany,Hong kong,...}
Sales organisation = {Berlin,Frankfurt,...} or according to = {Server, Consultation}?

Another question would be, why would someone want to split accordingly to the region like north south ? My understanding is that if the process is similar, a sales organization would be enough to reduce redundancy.

05 Apr 2009 6:24 pm Saif Khan
We will have a different company code for subsidiaries in different countries that is because all the balance sheet and p/l statements are prepared at the company code level for the purpose of reporting to the government.
They may have various sales organizations like Berlin, Frankfurt or based on regional subdivision or some other classification based on the company's requirements. We will make a sales area in the same manner by combining a sales organization, distribution channel and division. We can have various combinations if we have various sales organizations, distribution channels and divisions.

As for your second question. We need to have atleast one sales organization to carry out sales processes. We can do with a single sales organization for the entire country or we can have various sales organizations for different regions.
Having various sales organizations for various regions will help us to carry out sales analysis for various regions and based on these sales statistics we can devise various marketing plans for various regions. By carrying out comparison between various regions we can find if we are leading or lagging in any particular region.

21 Sep 2010 5:32 pm Guest
Hello Saif,
I understood all these terms and process involved, but when it comes to Hp,
as a super user i have undergone with few different scenarios, im bit confused with that.
For germany always my sales organisation would be DE00 whoever the customer is i use the same sales org, distribution channel, division and the company code. Is this sales org related to the customer/client or its default for the country itself.

22 Sep 2010 5:22 am Guest
In your case you have defined DE00 as the sales organisation for a country as a whole, so in ur case you are using only one sales organisation for the whole country. You have created just one Sales organisaiton, one distribution channel and one division and you have defined just one sales area for Germany. That is why you are using the same combination for every customer in Germany.
Saif Khan

10 Dec 2010 7:35 am Guest
Nice explanation

12 Jan 2011 7:15 am Guest
I know that Sales area is consists of Sales organization + Division + Distribution Channel. but in Sales organization has done every doucment related work.

11 Nov 2012 6:45 pm Guest
Fantastic mam,I really appreciate the way u r discribing.