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We have a situation where one of our customers has some components in stock and is sending this material to us to use in our manufacturing process. We will use his material along with ours. Some components are also available from our stock, so it might be the case that we will use the same component from both our stock and the customer stock to build this product. Once we use the material that the customer is sending to us we will return the rest back to them but it will still be useful to know what they have in stock because they want to use as much as they can of it. I don't want this stock to be visible in our financial reports because it is not ours. What is the recommended way of handling such situations? 

I created another warehouse and it's now set as Physical location/CustomerName/Stock and I set it up as Supplier location. Can I turn this warehouse stock availability on and off as required? I can't use this material on anyone else's products except for this particular customer.

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You could receive and the utilize the stock as Consignment stock


https://www.odoo.com/documentation/17.0/applications/inventory_and_mrp/inventory/shipping_receiving/daily_operations/owned_stock.html

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Thanks Jaideep,

When I tried it , I ended up with extra lines in the On hand page showing the quantity owned by customer in the same location, however I think that when reserving components for manufacturing, Odoo is using FIFO and is therefore using my stock instead of the customer's. Can I give priority to customer stock to be used first?

thanks

Yes, having multiple lines to represent on hand stock is standard expectation. Each of these stocks are unique (at the least ownership is different) and need to be identified, tracked and managed independently.
As default the reservation would be your stock and not consignment stock. However, you would have the ability to select customer stock on the MO by clicking on the hamburger icon.
Am not sure if there is any easy way to change this. Below post had some suggestions for this
https://www.odoo.com/forum/help-1/customers-product-us-as-component-in-manufacturing-242268

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