Inventory type is used to decide how inventory should be looked up. If the inventory type is "Basic", then that will be deferred to the inventory module to look up inventory. None will not use inventory at all (like perhaps for digital items).
The fulfillment type refers to how the Sku should be fulfilled. For instance, you might have a store that has digital goods (so those Skus' fulfillment types would be "Digital") and you might also sell physical goods that you ship out (a fulfillment type of "Physical Ship"), or some that could be shipped out or picked up in store ("Physical Pickup or Ship").
There should be a new section in the admin for "Fulfillment Locations" which is where you can administer inventory for all of your Skus.
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