We have just upgraded to 2025R1 and are trying to understand the inventory sources “Free Stock” and “Project Stock”. Main question described below:
I’ve come across this basic description, but it’s not making sense to me based on our project settings:

In our projects we have the inventory tracking as “Track by location”.

For our projects we usually do “Project Drop-Ship” Purchase orders, so the inventory never shows up in our warehouse. Any inventory that we receive on normal purchase orders if available to be issued to any project.
MAIN QUESTION: When processing inventory receipts or issuing inventory to a project, it now makes us choose whether it is “Free Stock” or “Project Stock”. We don’t want to classify it as such. Should we be worried about how it is classifying the stock? When issuing it to a project, the project will not be offered as a choice if we select “Free Stock” as you can see here:

It only allows us to issue it to the project if we select “Project Stock” as the inventory source.

Any thoughts on this? Hoping for some help in understanding it.

