Terminology
A Warehouse is a place in which your items are stocked. You can set up multiple warehouses and create moves between warehouses.
A Location is a specific space within your warehouse and can represent a shelf, a floor, an aisle, etc. A location can only be linked to one warehouse. You can configure as many locations as you need under one warehouse.
There are three types of locations:
Physical Locations are internal locations within your warehouse.
Partner Locations are locations within a customer and/or vendor’s warehouse.
Virtual Locations are places that do not exist but can place products when they are not physically in your inventory yet (or anymore). VIrtual locations are useful for handling inventory loss and stock in transit.
Each location can have a parent location and therefore have a hierarchy.
Advice and answers regarding Inventory