If the source is M2, it should be shipped out of M2 inventory
If you are trying to create IR/ISO for the first time, then please go through below documents to verify the setup.
When you transfer the material between two different organizations by Inter-org transfer or by ISO, shipping network should be in place.
INTER ORGANIZATION TRANSFERS [ID 147737.1]
R11: What Are The Steps Required To Setup An Internal Requisition In Purchasing? [ID 406312.1]
Please make sure the order has been imported by order import
I was facing exact same problem and it resolved by setting shipping parameters in source organization (in your case it is M2) and adding on hand quantity to this organization.
when luanch pick released concurrent program runs, it completes in normal status and next step in internal sales order was to transact move order.
Please follow below steps -
1. Find out the internal sales order created by using order organizer form:
Enter the Order Source as 'Internal'
Order Source Reference = IR Number which is created by you
2. Once you find the ISO number, you may then try for launch pick release.
Since the Source Organization is M2, Please make sure the warehouse entered during Pick Release is M2 and there is enough on-hand available for the ordered items in M2 org.
Please check first whether the Internal order for which you are trying to Pick release, either exists or not.
If the order exists, then please make sure the Orders field is having value as ALL and Order Type field is Null, then enter the order in order number filed in the Order tab of the Release Sales Order form, it should work.