Product Hierarchy 
A product hierarchy models any number of strictly hierarchical product groups in a tree structure.
In SAP F&R, a product hierarchy is either a "true" product hierarchy (analogous to the article hierarchy in an SAP Retail system) or a merchandise category hierarchy. In the latter case, the merchandise categories form the lowest level of the hierarchy.
You can create product hierarchies manually in SAP F&R or import an article hierarchy through the interface, for example, from an integrated SAP Retail system.
SAP F&R uses product hierarchies for selection, for example, in the workbenches for order proposal management and in the mass maintenance transactions.
You can use product hierarchies to define product hierarchy-dependent location groups.
Example
Products could have the following hierarchical relationship: Foods – Frozen Foods – Pizza.
Note
The merchandise category that is defined in SAP F&R must be entered as the valid merchandise category hierarchy in the client-specific customizing.
Settings for Hierarchy Structure and at Client Level
You define how many hierarchy levels you want the system to use, for example, for Structure Type Hierarchy and for Object Type Product.
For more information about product hierarchies, see the Implementation Guide (IMG) of Forecasting and Replenishment under
Master Data 
Define Hierarchy Structure 
.SAP F&R uses this hierarchy structure when you create a hierarchy manually or transfer it to SAP F&R through the interface.
You define a material category hierarchy, for example, which SAP F&R uses when selecting products from specific merchandise categories. For more information, see the IMG for Forecasting and Replenishment under
Master Data Define Settings at Client Level .