Setting up your locations for Shopify Fulfillment Network
Apps that stock inventory or fulfill orders for you, such as the Shopify Fulfillment Network (SFN) app, are considered locations. When you add the SFN app to your store, it's automatically added as a location. SFN doesn't count towards your account's location limit.
If a location has shipping rates assigned to it, and can fulfill an entire order, then the order is routed to that location for fulfillment. If no location has shipping rates assigned to it, or can't fulfill an entire order, then the location that has the highest priority oversells the product. Overselling is only blocked if inventory is sold out at all of your fulfillment locations.
If an order can be fulfilled at a single fulfillment location, then the order is routed to that fulfillment location. If the order can't be fulfilled at the location that you set as your first priority, then the other locations are checked for available inventory.
If inventory from multiple fulfillment locations is needed to fulfill a single order, then the order is split and the cart is charged a shipping fee for each location. When no fulfillment center can fulfill an order when SFN is the originally intended fulfillment location, the order is placed on hold in the SFN app because of insufficient inventory.
If the order can't be fulfilled for other reasons, then the order is labeled as Unfulfilled in your Shopify admin.
Learn more about setting up your locations.