Stock Management for Order Cancelation

When canceling an order, MSI supports:

The following tables track inventory updates for Magento and Magento + MSI installations.

Deduction After Order Placement (Table 1)

When an order is placed:

Magento deducts the amount ordered from the product quantity
Magento + MSI enters a reservation subtracted from the product's salable quantity (not from the on-hand inventory quantity)

When an order is placed then canceled, but not invoiced/shipped:

Magento adds the amount ordered to the product quantity
Magento + MSI enters a reservation compensation to the product's salable quantity (not from the on-hand inventory quantity). This effectively removes the reservation and provides additional salable quantities for that Stock.

When an order is canceled after shipment:

Magento does not affect the product quantity, except for configurable products. Currently, Magento does return the quantity to those products.
Magento + MSI does not affect reservations or quantities until a credit memo is placed, products returned.

Partial Shipment works this way: items that are already shipped(Table 3) and items that are still in inventory (Table 2)

When a credit memo is issued for an order refund, select the "Return to Stock", the following happens:

Magento adds amount to the product quantity
Magento + MSI adds back the quantity amount to the Source that shipped the products. For Single Source merchants, returns to Default Source. For Multi Source merchants, returns to the source that shipped the products. This can affect multiple sources for refunded, partial shipments. Reservation compensation added for increased salable quantity.

Multi-Source Inventory developed by Magento 2 Community