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
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
It’s like if you are having category CAR. In that many
cars come into picture.
CAR>>MARUTI>>SX4, Swift, zen,
B>> 01 >>01
Then from above example B0101 is the hierarchy for
So in that hierarchy many cars come, like variants and
all the things.
In this way you can take e.g. of wood products
It shows the next level of the product. How many levels
that product are having.