An error message shows when the item subsidiary edits to set parent-subsidiary and marks the “Include Children” checkbox as True or sets multiple subsidiaries. The error message looks like this – “The subsidiary restrictions on this record are incompatible with those defined for the location. Subsidiary access on this record must be a subset of those permitted by the location.”
Possible reason: The Location value or Preferred location value is only available to one Subsidiary.
Clear the Location field(Under Classification field group) or Preferred Location field (Under Inventory subtab) values.
Set the parent-subsidiary and then you can set the location Value after that.