Product Category Hierarchy - SRM

I have doubts on Product Category hierarchy....

1) As far as i understand whenever we replicate the material from Backend R/3 there is a product hiearachy created and assigned automatically. However, we also have the option of creating local hiearachies.

So, what i did was for the same product category i assigned two hierarchies. One the standard R3MATCLASS and other which i created manually in SRM. Then i assigned the two hierarchies while creating the material manually in SRM. However, i am not able to get the significance of this? Why has SAP provided this provision of having multiple hieararchies?

2) I read from the help portal in SAP that Product Hierarchy helps in determining the source of supply. I am not able to understand how that is possible. I have searched for documentation all around but could not find any?

3) In one of the forums i saw that one consultant activated the product hiearachy, then to his surprise the automatic sourcing configuration which he had done has not worked due to activation of hierarchies

Has anyone worked indepth in this field. Any inputs is greatly welcome as i am doing some indepth work on this

Thank You

Abhinandan