Go to the "Sales Channels → SO Cancellations" menu.
Step 1: 
Step 2:
Notes:
If nothing was picked the cancellation process is complete. But If items were picked then they will need to be put back into stock. Create new return process is not the correct one to put the item back into stock.
After the dispatch cancellation confirmed and that the scheduler runs...On the menu click on "Logistics->Inventory->Receiving List-> A new ASN will be created that will allow you to receive the items you picked for the cancelled order back into stock. it would have a delivery No and HB ref to read "SS Cancellation - Dispatch (number)