Subinventiries are unique physical or logical separations of material inventory. These can be RAW material, finished GOODS or defective material sub inventory. You must define at least one sub inventory. Sub inventories are of two types: storage and receiving.
Storage sub inventories are intermediate or final put away locations for material. Material that resides in a storage sub inventory appears in on hand quantity, and is TRACKED by the SYSTEM. The system can book orders against, and use manufacturing processes on material that resides in a storage sub inventory. You must define at least one storage sub inventory for your implementation.
Receiving type sub inventory is only used for receiving items. Items in this sub inventories cannot be on-hand or RESERVED.