This suggestion is for inventory items that still have a quantity on hand, however, are no longer available from the vendor or we are discontinuing and once it's gone....it's gone.

We change the Item Description to start with "OBSOLETE - "    This can be easily removed at invoicing so the customer doesn't see it.    We then create either a custom look-up or run the Inventory Stock Status Report with the criteria  "Item Description  - Begins with - OBSOLETE"  to isolate those "OBSOLETE" items and Discontinue them as the inventory is eliminated.

Hopefully this helps!

Starting with version 4.5 (I think), there is an "Inactive Item" box on the Additional tab, plus the Item Type "Discontinued" (as opposed to Raw material/Finished Good) on the Main tab is still available.  Sounds like "Discontinued" is what you want to use. May want to also include a memo warning that the item is discontinued and to check inventory quantity and advise order entry personnel to use up "discontinued" quantities before using the new item (which you could make inactive until the discontinued inventory is used up. Could use alias or alternate item to reference new item if old item is consumed.  BTW, you can create a custom lookup to identify the discontinued items as well.  Stock Status report has checkboxes to include/exclude Discontinued and/or inactive items.

Here's what the help screen says about discontinued and inactive items. . .

Inactive Item - Select this check box to make the item inactive. If an item is inactive, it cannot be entered when adding a line in Sales Order Entry, Sales Order Invoice Data Entry, Purchase Order Entry, Receipt of Goods Entry, Receipt of Invoice Entry, and Material Requisition Issue Entry. An inactive item can be entered when adding a line in Return of Goods Entry and Inventory Management Transaction Entry only if the appropriate security is set up.

Alternately, if Discontinued is selected at the Product Type field and the item is entered in a data entry task, a message dialog box appears stating that the item is discontinued and asking whether or not to continue. If you click Continue, the item is accepted.