Hi,
That happens when Item Allocation fails.
The fact that there is work indicates that there is enough inventory for system to reserve the quantity of item using the Reservation Hierarchy (Site, warehouse, inventory status, etc) but the Location Directive do not allow picking from which ever location where that inventory is stored. Normally, you would not allow work to be created without locations (unless that is wanted), so my guess is that the Location Directive Failures allow for Sales Work to be created (as below).
I would suggest:
1)confirm that Location Directive Failure to validate that we allow work to be created
2)check the Location Directive for Sales Order to see which conditions are used and which locations are allow
3) verify the location(s) where that specific item is kept with (the correct reserved inventory dimnesions)
4) Activate and check the Work Creation History Log and see why it fails
Note that some fields displayed on your screen shot (Reservation Failed and Proposed Location) are not available in standard version 10.0.43, so there could be added code that affects standard functionality; may be worth working with a developper to figure out what`s happening