As mentioned in this blog post, it is unfortunately not possible to use the "Adjust inventory" functionality together with a work exception of the type "short pick" if the items have any tracking dimensions below the location.

However most of the time items with batch below locations are used (at least in our projects) because the batch above location would be an "overkill" for other warehouse procedures.

The idea would be to extend that functionality in the standard and enable it also for items with tracking dimension below location.

Thank you!

https://cloudblogs.microsoft.com/dynamics365/no-audience/2016/11/07/automatic-and-manual-item-reallocation-during-the-short-picking-dynamics-365-for-operations-1611/

Text part from the blog post:

Note, if the Adjust Inventory option is selected, all quantity for the location and the dimensions above the item that is being short picked will be adjusted. This does not apply to items with tracking dimensions that are below the location.