This option is selected when the kanban rule creates inventory transactions, and one or more of the following conditions ...

This option is selected when the kanban rule creates inventory transactions, and one or more of the following conditions are true: (a) the kanban type is Manufacturing; (b) the kanban type is Withdrawal, and the picking and receipt locations are managed by subcontractors; (c) the kanban type is Withdrawal, and the picking and receipt locations are on different sites; and (d) the kanban type is Withdrawal, and either the picking activity updates the available inventory, and the receipt does not update available inventory but is transferred to WIP (work in process), or the picking activity does not update available inventory, but the receipt is transferred from WIP and does update available inventory.
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