Basic SD Questions On Product Hierarchies

What is the significance of product hierarchy?

Alphanumeric character string for grouping materials by combining various characteristics. The product hierarchy is used for evaluation and pricing purposes.

A product hierarchy is an alphanumeric character string which consists of 18 characters at the most. Product hierarchy thus define the product and its composition.

To take an example, a product hierarchy could be 00010002000300040005. The first four characters 0001 could indicate that the product is a car. The next four characters could indicate 0002 the plant in which the car has been manufactured. The third set of characters could indicate the color of the car. The next set may determine its engine capacity and so on. Thus, the product hierarchy helps in defining the product composition.

Product hierarchy is defined in tcode v/76 according to levels.

Then it is added as a user defined characteristic in tcode KES1.

It is used for sales reporting functionality based on the product hierarchy. It is used for profitability analysis reporting.


Different material codes can have same product hierarchy (assigned to material master in basic data view).

When a sales cycle happen then after billing document a PA (profitability analysis) document is created in which product hierarchy is populated and used in CO-PA reporting.


Explain the use of product hierarchy and the step by step procedure to define and use it?

Product Hierarchy is used for Profitability analysis. You can have maximum of three level in SAP for a product.

You have to give the product hierarchy in Material master Sales- Sales Org -2 view. You can define the product hierarchy in IMG settings from the following path

Customizing is to be made in:

IMG -- Logistics General --> Material Master --> Settings for Key Fields --> Data Relevant to Sales and Distribution --> Define Product Hierarchies --> Maintain Product Hierarchy

Product hierarchies can be created using code OVSV. A product hierarchy is assigned to the material master record. The hierarchy is broken down into specific levels, each level containing its own characteristics.

A product hierarchy is recorded by the sequence of digits within a hierarchy number. The hierarchy number can have a maximum of 18 digits with a maximum number of nine levels.

Thus by assigning the hierarchy number to the material, one can determine a classification of the material. This hierarchy can be used in pricing with each level being used as field in the condition technique.

It’s like if you are having category CAR. In that many cars come into picture.

CAR>>MARUTI>>SX4, Swift, zen, alto.

B>> 01 >>01

Then from above example B0101 is the hierarchy for SX4.

So in that hierarchy many cars come, like variants and all the things.

In this way you can take e.g. of wood products also.

It shows the next level of the product. How many levels that product are having.

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