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Categories and Hierarchies 
Structuring mechanism for modeling purposes within the product master.
Categories and hierarchies are used to group products and individual objects according to different criteria. The purpose of a hierarchy will depend on the business criteria involved and your company's requirements.
A hierarchy can be multi-level and be used for control or informative purposes.
You can assign hierarchies toapplications. For more information, look in the Customizing of Cross-Application Components under SAP Products ® Product Category ® Assign Category Hierarchies to Applications.
Within the product master, assigning a hierarchy to the application Product enables it to be used as a base hierarchy within the product master. Each product/individual object created must be assigned to a category from this base hierarchy.
Categories are arranged in hierarchies. All lower-level categories inherit the product type and the set types of the higher-level category. Additional set types can be assigned to lower-level categories.
An example is shown below:
If a product type is assigned to a category, only products/individual objects of this product type can be assigned to the category. Assigning a product type to a category makes it possible to assign set types to the category. In product or individual object maintenance, these set types appear within the views (that is, on the tab pages) that can be maintained for a product or individual object.
To prevent a set type from being assigned to a product or individual object more than once (via different categories), the following rules apply when working with categories and hierarchies:
·
A set type may be assigned to several
categories in a hierarchy. However, a set type may be assigned only in one
hierarchy per product type.
For example, a set type cannot be assigned to two categories in different
hierarchies if these categories have the same product type. However, this is
possible if the product type is different.
· A product or individual object can be assigned to several product categories, as long as they belong to different hierarchies. A product or individual object can therefore only be assigned to one category per hierarchy.

The same rules apply to the assignment of relationship types.
·
Hierarchies and
categories can be transported.
For more information, look in the Customizing of Cross-Application
Components under SAP Products ® Product Category ® Transport Categories.
·
The category
assignment of a product or individual object can be changed.
To do so, in the user menu, choose Recategorize Products / Individual
Objects..
·
You can assign
templates to
categories. The templates are valid for all products or individual objects
that have been assigned to this category.