Customer Hierarchy in Sales Order Processing

Introduction

In SAP Sales and Distribution (SD), the Customer Hierarchy is a powerful feature that enables businesses to group customers and manage their pricing, discounts, and reporting with flexibility. By configuring the hierarchy correctly, companies can implement pricing rules at multiple levels and ensure that customer-specific conditions are inherited accurately.

What is Customer Hierarchy in SAP?

Customer Hierarchy is a structured way to organize customers into different levels. This allows companies to define pricing, discounts, and sales responsibilities at different hierarchy nodes, which are then inherited by the lower-level customers.

For example, a corporate customer may have multiple subsidiaries, and discounts offered to the parent company can automatically apply to its branches.

Configuration Steps for Customer Hierarchy in SAP

Follow these steps to configure customer hierarchy in SAP:

Step 1: Define Hierarchy Types (Transaction Code: OVH1) (Optional)

You can create a custom hierarchy type or use the standard hierarchy type "A". This type is referenced throughout the configuration process.

Path:
SPRO → SAP Reference IMG → Sales and Distribution → Master Data → Business Partner → Customer → Customer Hierarchy

Step 2: Set Up Partner Determination for Customer Hierarchy

a) Define Partner Functions

Configure partner functions as follows:
  • 1a KU → 1b A
  • 1b KU → 1c A
  • 1c KU → 1d A
  • 1d KU → -- A

b) Assign Account Group Functions

You must assign account groups for Sold-To, Bill-To, Ship-To, and Payer roles.
 
Role Account Group
Sold-To 1A, 1B, 1C, 1D
Bill-To 1A
Ship-To 1A
Payer 1A

Step 3: Assign Account Groups (Transaction Code: OVH2)

Map the standard account groups to your custom groups.

Example:
 
Standard A/C Group Your A/C Group
0012 Sold-To
Sold-To Ship-To
Ship-To Bill-To

Customize based on your business requirements.

Step 4: Assign Sales Areas (Transaction Code: OVH3)

  • Create new entries from higher to lower levels.
  • Discounts or pricing maintained at higher levels are passed down the hierarchy.
This setup enables centralized pricing control across customers.

Step 5: Assign Hierarchy Type for Pricing by Sales Document Types (Transaction Code: OVH4)

Link your sales document types with the hierarchy type (e.g., A) for pricing relevance.

Step 6: Create Nodes for Customer Hierarchy (Transaction Code: V-12)

Create condition records for hierarchy nodes using standard account group 0012.
These nodes are essential for defining the structure of your customer tree.

Step 7: Maintain Customer Hierarchy Relationships (Transaction Code: VDH1N)

  • Use the hierarchy type “A” and the node number created in V-12.
  • Assign lower-level customers to the relevant hierarchy node.
Example Structure:

0012 ----
    ├── XXXXXX
    ├── YYYYYY
    ├── ZZZZZZ
          └── KKKKKK

In this setup:

  • Discounts assigned to 0012 apply to X, Y, Z.
  • Customer K only inherits discounts from Z.

Step 8: Maintain Hierarchy Discount Types in Pricing Procedure

Include condition types HI01 or HI02 in your pricing procedure to support hierarchical discounts.

Step 9: Maintain Discounts by Node or Customer (Transaction Code: VK11)

Create pricing condition records using:
  • Node Number (from V-12)
  • Condition Types (HI01/HI02)
This enables flexible pricing control at both the node and individual customer levels.

Validating Customer Hierarchy in Sales Order Processing

Once configuration is complete, you can validate the customer hierarchy during Sales Order creation:

1. Create a sales order using a lower-level customer.
2. System automatically pulls pricing from its assigned hierarchy node.
3. Navigate to the pricing screen to view applied discounts and conditions.
4. Run transaction VDH1N to confirm customer-to-node assignments.

Best Practice: Use test scenarios across different customer levels to ensure correct inheritance of conditions.

Goto:
SAP SD Pricing

Goto:
Billing / Shipping

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SAP SD (Sales and Distribution) Configuration Hints and Tips

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SAP ABAP/4 Programming, Basis Administration, Configuration Hints and Tips

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