Every inventory item can be assigned to a location.  You can define those locations by going to Site Configuration → Inventory Locations, as shown here.

Click Add a New Item to add a location to this list.

Each location applies either to Library or Equipment items.  If you don't have more than one location for a given type of inventory, then you may not need to create a location for that type, since the location is optional on the inventory record.

Enter a short Location Name that describes this location.

Click Save & Add Another to continue adding entries, or Save & Exit to save this entry and return to the list.