This switch is to ignore future FBA quantities for the Amazon channel by subtracting the quantities of FBA items from the default inventory which means that the quantity on inbound will not be seen in your channel inventory.
In default inventory, for one item, let’s say the quantity you have is 10 which is your FBM inventory for this item.
Quantity on inbound for this item (FBA quantity) is 20
30 is your total inventory (FBM+FBA) for this item.
If you enable this switch in your Amazon channel, the quantity on hand will be shown as 10 FBM in the Amazon channel until your FBA stocks enter Amazon warehouses.
This switch can be found at Amazon Channel> Channel Settings> Common and under Inventory Tab.