Organization Model Framework – Microsoft Dynamics AX 2012


An organization model is the departmental or the organizational structure on which an organization is based. Every organization, be it small or an enterprise, there is some sort of structure that is followed. For example, a company or a group of company has several sub-companies and then they have departments and in them are sub departments and they have the people in department.

Organization Modelling

Every good ERP system gives the capability of modelling the organization structure in it to make the processes and companies communicate with each other using the ERP. Likewise, Microsoft Dynamics AX provides the Organization Model framework and functionality by which the organization can implement the structure in the system.

“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.”

From a component level of Dynamics AX, the organization model is an application foundation and lies low down in the application stack.

Organization Model lies at the application foundation

Organization Model lies at the application foundation. Credit: Microsoft


What does Organization Model offers

Hierarchical Structure

In real life scenarios, organizations usually have hierarchical structure used to define business policies and rules and for implementing security policies and reporting.

Multiple Hierarchies

The organization model framework provided by the MS Dynamics AX 2013 supports multiple hierarchies that take effect on more than one date.

Multiple purposes

This framework also supports the creation of hierarchies that can be used for multiple purposes.

Easy modeling of organization

The framework is designed in a way to be easy for application developers to create organization model using the Dynamics client easily without writing much code and dive into the complexity of organizations. It is equally easy for the implementers or a person modelling it with less or no coding knowledge can easily model it. One just need to understand the actual or physical hierarchy of the organization to be modelled.

Extend the organization model to cater industry specific needs

By doing some customization, the flexible framework can be extended to cater industry specific needs.

Organization Model Concepts

Below is a conceptual model. This will help us understand the concepts of organization model MS Dynamics AX.


Organization Model - Conceptual Model

Organization Model – Conceptual Model. Credit: Microsoft

Internal Organization

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.

1. 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.

It is the external view of your organization. They are required to prepare reports  on a recurring basis. It can own assets according to law and is responsible for all its liabilities.



2. 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.



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

i. Business Unit

A business unit is primarily an operating organization with a focus on industries or product lines that the organization is supposed to serve.

ii. Cost Center

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.

iii. Department

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.

iv. Value Stream

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.

3. Team

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.


Abubaker Siddiq Shekhani

Abubaker Shekhani is an IT Entrepreneur and Full Stack Developer. He is the co-founder and the Developer behind Mytabeeb, a health care solution. He has worked for 5 years in Microsoft Dynamics AX space with Techno-functional role and glad to be one of few Microsoft Dynamics AX developers/consultants in Pakistan. He is TEDx speaker and likes to speak in public. He is an Amateur Astronomer and Astrophotographer. He is the founding member of Karachi Astronomers Society. He can be reached at

You may also like...