Use of product hierarchy

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.