Organization Model framework overview In Dynamics Ax 2012

Every organization which is small or large, have some sort of organizational structure. For example in a large organization it is possible that company have several sub-companies and then they have departments, then sub departments and they have the people in department.
Like other ERPS, Microsoft Dynamics AX provides the Organization Model framework and functionality.
“The organization model represents internal control, data security access, and performance reporting structures designed to divide responsibility for human and operations resources and work processes.”
If we explore the organization model in at component level of dynamics follower diagram described it at application stack.


Usually organizations have hierarchical structures to define business polices, rules and implementing security policies and reporting.
Dynamics Ax 2012 organization model framework supports multiple hierarchies and the hierarchies take effects on more than one date. Multiple purposes hierarchies also supported.
The framework is designed to create organization model without writing single line of code, Only organizational knowledge is required. One just need to understand the actural or physical hierarchy of the organization to be model.
By doing some customization, the flexible framework can be extended to cater industry specific needs.
Below is a conceptual model. This will help us understand the concepts of organization model MS Dynamics AX.


At the center of the concepts is the International Organization which is used to model any internal organization and not an external organization such as vendor or customer’s organization hierarchies.
There are 3 types of internal organizations provided with MS Dynamics AX 2012.
Legal Entity:
A legal entity is an organization with a registered or legislated legal structure that is granted the authority to enter into legal contracts and that is required to prepare statements that report on its performance.
A legal entity is an external view of organization. Legal entities are required to prepare reports on recurring basis. Legal entities can own assets and liabilities.



Operating unit:
An operating unit is an organization that divides the control of economic resources and operational processes among people who have a duty to maximize the use of scarce resources, to improve processes, and to account for their performance.
Organizations that are relevant to other application areas can also be set up in Human resources and General ledger.



In Dynamics Ax 2012, there are several operating units are provided.
Internal view of your organization. It is responsible for internal reporting. In Microsoft Dynamics AX 2012, there are several operating units are provided out of the box. They are
A business unit is primarily an operating organization with a focus on industries or product lines that the organization is supposed to serve.
A cost center is a type of operating unit that describes an organization used for tracking costs or expenses. It is a cost accumulator, and is used to manage costs.
A department is a type of operating unit that may have profit and loss responsibility and could be a grouping of cost centers. Departments also are often created based on functional responsibility or skill, such as sales and marketing.
A value stream is a type of operating unit commonly used in lean manufacturing. In lean manufacturing, a value stream owns one or more production flows that describe the activities and flows needed to supply a product, good, or service to the consumers of the product.

A team is also a type of an internal organization, but it is an informal group of people primarily created for a specific purpose over a short duration. Teams may be created for specific projects or services.




Ali Raza Zaidi, Microsoft ERP Consultant, Currently working for Business Experts Gulf in United Arab Emirates. Specialized in HR & Payroll, Supply Chain and Financials modules.