diff --git a/vendor/magento/module-inventory-sales/Observer/SalesInventory/DeductSourceItemQuantityOnRefundObserver.php b/vendor/magento/module-inventory-sales/Observer/SalesInventory/DeductSourceItemQuantityOnRefundObserver.php
deleted file mode 100644
index f080682019b..00000000000
--- a/vendor/magento/module-inventory-sales/Observer/SalesInventory/DeductSourceItemQuantityOnRefundObserver.php
+++ /dev/null
@@ -1,144 +0,0 @@
-<?php
-/**
- * Copyright © Magento, Inc. All rights reserved.
- * See COPYING.txt for license details.
- */
-declare(strict_types=1);
-
-namespace Magento\InventorySales\Observer\SalesInventory;
-
-use Magento\Framework\Event\Observer;
-use Magento\Framework\Event\ObserverInterface;
-use Magento\InventoryCatalogApi\Model\GetProductTypesBySkusInterface;
-use Magento\InventoryConfigurationApi\Model\IsSourceItemManagementAllowedForProductTypeInterface;
-use Magento\InventorySales\Model\ReturnProcessor\DeductSourceItemQuantityOnRefund;
-use Magento\InventorySalesApi\Model\GetSkuFromOrderItemInterface;
-use Magento\InventorySalesApi\Model\ReturnProcessor\Request\ItemsToRefundInterfaceFactory;
-use Magento\Sales\Api\Data\CreditmemoItemInterface as CreditmemoItem;
-use Magento\Sales\Api\Data\OrderItemInterface;
-use Magento\Sales\Api\OrderRepositoryInterface;
-
-class DeductSourceItemQuantityOnRefundObserver implements ObserverInterface
-{
-    /**
-     * @var GetSkuFromOrderItemInterface
-     */
-    private $getSkuFromOrderItem;
-
-    /**
-     * @var ItemsToRefundInterfaceFactory
-     */
-    private $itemsToRefundFactory;
-
-    /**
-     * @var IsSourceItemManagementAllowedForProductTypeInterface
-     */
-    private $isSourceItemManagementAllowedForProductType;
-
-    /**
-     * @var GetProductTypesBySkusInterface
-     */
-    private $getProductTypesBySkus;
-
-    /**
-     * @var DeductSourceItemQuantityOnRefund
-     */
-    private $deductSourceItemQuantityOnRefund;
-
-    /**
-     * @var OrderRepositoryInterface
-     */
-    private $orderRepository;
-
-    /**
-     * @param GetSkuFromOrderItemInterface $getSkuFromOrderItem
-     * @param ItemsToRefundInterfaceFactory $itemsToRefundFactory
-     * @param IsSourceItemManagementAllowedForProductTypeInterface $isSourceItemManagementAllowedForProductType
-     * @param GetProductTypesBySkusInterface $getProductTypesBySkus
-     * @param DeductSourceItemQuantityOnRefund $deductSourceItemQuantityOnRefund
-     * @param OrderRepositoryInterface $orderRepository
-     */
-    public function __construct(
-        GetSkuFromOrderItemInterface $getSkuFromOrderItem,
-        ItemsToRefundInterfaceFactory $itemsToRefundFactory,
-        IsSourceItemManagementAllowedForProductTypeInterface $isSourceItemManagementAllowedForProductType,
-        GetProductTypesBySkusInterface $getProductTypesBySkus,
-        DeductSourceItemQuantityOnRefund $deductSourceItemQuantityOnRefund,
-        OrderRepositoryInterface $orderRepository
-    ) {
-        $this->getSkuFromOrderItem = $getSkuFromOrderItem;
-        $this->itemsToRefundFactory = $itemsToRefundFactory;
-        $this->isSourceItemManagementAllowedForProductType = $isSourceItemManagementAllowedForProductType;
-        $this->getProductTypesBySkus = $getProductTypesBySkus;
-        $this->deductSourceItemQuantityOnRefund = $deductSourceItemQuantityOnRefund;
-        $this->orderRepository = $orderRepository;
-    }
-
-    /**
-     * @param Observer $observer
-     * @return void
-     */
-    public function execute(Observer $observer)
-    {
-        /* @var $creditmemo \Magento\Sales\Model\Order\Creditmemo */
-        $creditmemo = $observer->getEvent()->getCreditmemo();
-        $order = $this->orderRepository->get($creditmemo->getOrderId());
-        $itemsToRefund = $refundedOrderItemIds = [];
-        /** @var CreditmemoItem $item */
-        foreach ($creditmemo->getItems() as $item) {
-            /** @var OrderItemInterface $orderItem */
-            $orderItem = $item->getOrderItem();
-            $sku = $this->getSkuFromOrderItem->execute($orderItem);
-
-            if ($this->isValidItem($sku, $item)) {
-                $refundedOrderItemIds[] = $item->getOrderItemId();
-                $qty = (float)$item->getQty();
-                $processedQty = $orderItem->getQtyInvoiced() - $orderItem->getQtyRefunded() + $qty;
-                $itemsToRefund[$sku] = [
-                    'qty' => ($itemsToRefund[$sku]['qty'] ?? 0) + $qty,
-                    'processedQty' => ($itemsToRefund[$sku]['processedQty'] ?? 0) + (float)$processedQty
-                ];
-            }
-        }
-
-        $itemsToDeductFromSource = [];
-        foreach ($itemsToRefund as $sku => $data) {
-            $itemsToDeductFromSource[] = $this->itemsToRefundFactory->create([
-                'sku' => $sku,
-                'qty' => $data['qty'],
-                'processedQty' => $data['processedQty']
-            ]);
-        }
-
-        if (!empty($itemsToDeductFromSource)) {
-            $this->deductSourceItemQuantityOnRefund->execute(
-                $order,
-                $itemsToDeductFromSource,
-                $refundedOrderItemIds
-            );
-        }
-    }
-
-    /**
-     * @param string $sku
-     * @param CreditmemoItem $item
-     * @return bool
-     */
-    private function isValidItem(string $sku, CreditmemoItem $item): bool
-    {
-        /** @var OrderItemInterface $orderItem */
-        $orderItem = $item->getOrderItem();
-        // Since simple products which are the part of a grouped product are saved in the database
-        // (table sales_order_item) with product type grouped, we manually change the type of
-        // product from grouped to simple which support source management.
-        $typeId = $orderItem->getProductType() === 'grouped' ? 'simple' : $orderItem->getProductType();
-
-        $productType = $typeId ?: $this->getProductTypesBySkus->execute(
-            [$sku]
-        )[$sku];
-
-        return $this->isSourceItemManagementAllowedForProductType->execute($productType)
-                && $item->getQty() > 0
-                && !$item->getBackToStock();
-    }
-}
diff --git a/vendor/magento/module-inventory-sales/etc/di.xml b/vendor/magento/module-inventory-sales/etc/di.xml
index b94a1e61023..19faa0c3719 100644
--- a/vendor/magento/module-inventory-sales/etc/di.xml
+++ b/vendor/magento/module-inventory-sales/etc/di.xml
@@ -169,6 +169,9 @@
         <plugin name="delete_website_to_stock_link" type="Magento\InventorySales\Plugin\Store\Model\ResourceModel\Website\DeleteWebsiteToStockLinkPlugin"/>
         <plugin name="update_sales_channel_website_code" type="Magento\InventorySales\Plugin\Store\Model\ResourceModel\Website\UpdateSalesChannelWebsiteCodePlugin"/>
     </type>
+    <type name="Magento\Sales\Api\CreditmemoRepositoryInterface">
+        <plugin name="deduct_source_item_quantity_on_refund" type="Magento\InventorySales\Plugin\Sales\OrderManagement\DeductSourceItemQuantityOnRefundPlugin"/>
+    </type>
     <type name="Magento\InventoryApi\Model\StockValidatorChain">
         <arguments>
             <argument name="validators" xsi:type="array">
diff --git a/vendor/magento/module-inventory-sales/etc/events.xml b/vendor/magento/module-inventory-sales/etc/events.xml
index 63cfbdac442..568e90310f8 100644
--- a/vendor/magento/module-inventory-sales/etc/events.xml
+++ b/vendor/magento/module-inventory-sales/etc/events.xml
@@ -12,10 +12,6 @@
     <event name="sales_order_item_cancel">
         <observer name="inventory" instance="Magento\InventorySales\Observer\CatalogInventory\CancelOrderItemObserver"/>
     </event>
-    <event name="sales_order_creditmemo_save_after">
-        <observer name="deduct_source_item_quantity_on_refund" instance="Magento\InventorySales\Observer\SalesInventory\DeductSourceItemQuantityOnRefundObserver"/>
-    </event>
-
     <!--There is no need to register product sale and reindex stock items, as in multi source inventory only reservations are created after order placement.-->
     <event name="checkout_submit_all_after">
         <observer name="inventory" instance="Magento\CatalogInventory\Observer\CheckoutAllSubmitAfterObserver" disabled="true"/>
diff --git a/vendor/magento/module-inventory-sales/Plugin/Sales/OrderManagement/DeductSourceItemQuantityOnRefundPlugin.php b/vendor/magento/module-inventory-sales/Plugin/Sales/OrderManagement/DeductSourceItemQuantityOnRefundPlugin.php
new file mode 100644
index 00000000000..54e5d95dae5
--- /dev/null
+++ b/vendor/magento/module-inventory-sales/Plugin/Sales/OrderManagement/DeductSourceItemQuantityOnRefundPlugin.php
@@ -0,0 +1,189 @@
+<?php
+/**
+ * Copyright © Magento, Inc. All rights reserved.
+ * See COPYING.txt for license details.
+ */
+declare(strict_types=1);
+
+namespace Magento\InventorySales\Plugin\Sales\OrderManagement;
+
+use Magento\InventoryCatalogApi\Model\GetProductTypesBySkusInterface;
+use Magento\InventoryConfigurationApi\Model\IsSourceItemManagementAllowedForProductTypeInterface;
+use Magento\InventorySales\Model\ReturnProcessor\DeductSourceItemQuantityOnRefund;
+use Magento\InventorySalesApi\Model\GetSkuFromOrderItemInterface;
+use Magento\InventorySalesApi\Model\ReturnProcessor\Request\ItemsToRefundInterfaceFactory;
+use Magento\Sales\Api\CreditmemoRepositoryInterface;
+use Magento\Sales\Api\Data\CreditmemoInterface;
+use Magento\Sales\Api\Data\CreditmemoItemInterface as CreditmemoItem;
+use Magento\Sales\Api\Data\OrderItemInterface;
+use Magento\Sales\Api\OrderRepositoryInterface;
+use Magento\Catalog\Model\ResourceModel\Product as ProductResourceModel;
+
+class DeductSourceItemQuantityOnRefundPlugin
+{
+    /**
+     * @var GetSkuFromOrderItemInterface
+     */
+    private $getSkuFromOrderItem;
+
+    /**
+     * @var ItemsToRefundInterfaceFactory
+     */
+    private $itemsToRefundFactory;
+
+    /**
+     * @var IsSourceItemManagementAllowedForProductTypeInterface
+     */
+    private $isSourceItemManagementAllowedForProductType;
+
+    /**
+     * @var GetProductTypesBySkusInterface
+     */
+    private $getProductTypesBySkus;
+
+    /**
+     * @var DeductSourceItemQuantityOnRefund
+     */
+    private $deductSourceItemQuantityOnRefund;
+
+    /**
+     * @var OrderRepositoryInterface
+     */
+    private $orderRepository;
+
+    /**
+     * @var ProductResourceModel
+     */
+    private $productResource;
+
+    /**
+     * @param GetSkuFromOrderItemInterface $getSkuFromOrderItem
+     * @param ItemsToRefundInterfaceFactory $itemsToRefundFactory
+     * @param IsSourceItemManagementAllowedForProductTypeInterface $isSourceItemManagementAllowedForProductType
+     * @param GetProductTypesBySkusInterface $getProductTypesBySkus
+     * @param DeductSourceItemQuantityOnRefund $deductSourceItemQuantityOnRefund
+     * @param OrderRepositoryInterface $orderRepository
+     * @param ProductResourceModel $productResource
+     */
+    public function __construct(
+        GetSkuFromOrderItemInterface $getSkuFromOrderItem,
+        ItemsToRefundInterfaceFactory $itemsToRefundFactory,
+        IsSourceItemManagementAllowedForProductTypeInterface $isSourceItemManagementAllowedForProductType,
+        GetProductTypesBySkusInterface $getProductTypesBySkus,
+        DeductSourceItemQuantityOnRefund $deductSourceItemQuantityOnRefund,
+        OrderRepositoryInterface $orderRepository,
+        ProductResourceModel $productResource
+    ) {
+        $this->getSkuFromOrderItem = $getSkuFromOrderItem;
+        $this->itemsToRefundFactory = $itemsToRefundFactory;
+        $this->isSourceItemManagementAllowedForProductType = $isSourceItemManagementAllowedForProductType;
+        $this->getProductTypesBySkus = $getProductTypesBySkus;
+        $this->deductSourceItemQuantityOnRefund = $deductSourceItemQuantityOnRefund;
+        $this->orderRepository = $orderRepository;
+        $this->productResource = $productResource;
+    }
+
+    /**
+     * On Credit Memo create, issues the reservation compensation record.
+     *
+     * Before saving the credit memo, validates if the credit memo object was created or updated.
+     * If the credit memo was updates, we should not compensate the reservation.
+     *
+     * @param CreditmemoRepositoryInterface $subject
+     * @param callable $proceed
+     * @param CreditmemoInterface $entity
+     * @return mixed
+     * @SuppressWarnings(PHPMD.UnusedFormalParameter)
+     */
+    public function aroundSave(
+        CreditmemoRepositoryInterface $subject,
+        callable $proceed,
+        CreditmemoInterface $entity
+    ) {
+        $isNewCreditMemo = !(bool)$entity->getEntityId();
+        $result = $proceed($entity);
+
+        if ($isNewCreditMemo) {
+            $this->compensateReservation($entity);
+        }
+
+        return $result;
+    }
+
+    /**
+     * Compensate reservation for creditmemo item
+     *
+     * @param CreditmemoInterface $creditMemo
+     * @return void
+     */
+    private function compensateReservation(CreditmemoInterface $creditMemo): void
+    {
+        $order = $this->orderRepository->get($creditMemo->getOrderId());
+        $itemsToRefund = $refundedOrderItemIds = [];
+        $productSkus = [];
+        /** @var CreditmemoItem $item */
+        foreach ($creditMemo->getItems() as $item) {
+            /** @var OrderItemInterface $orderItem */
+            $orderItem = $item->getOrderItem();
+            $sku = $this->getSkuFromOrderItem->execute($orderItem);
+            $productSkus[] = $sku;
+
+            if ($this->isValidItem($sku, $item)) {
+                $refundedOrderItemIds[] = $item->getOrderItemId();
+                $qty = (float)$item->getQty();
+                $processedQty = $orderItem->getQtyInvoiced() - $orderItem->getQtyRefunded() + $qty;
+                $itemsToRefund[$sku] = [
+                    'qty' => ($itemsToRefund[$sku]['qty'] ?? 0) + $qty,
+                    'processedQty' => ($itemsToRefund[$sku]['processedQty'] ?? 0) + (float)$processedQty
+                ];
+            }
+        }
+
+        $existingProductIdsBySkus = $this->productResource->getProductsIdsBySkus($productSkus);
+
+        $itemsToDeductFromSource = [];
+        foreach ($itemsToRefund as $sku => $data) {
+            if (array_key_exists($sku, $existingProductIdsBySkus)) {
+                $itemsToDeductFromSource[] = $this->itemsToRefundFactory->create([
+                    'sku' => $sku,
+                    'qty' => $data['qty'],
+                    'processedQty' => $data['processedQty']
+                ]);
+            }
+        }
+
+        if (!empty($itemsToDeductFromSource)) {
+            $this->deductSourceItemQuantityOnRefund->execute(
+                $order,
+                $itemsToDeductFromSource,
+                $refundedOrderItemIds
+            );
+        }
+    }
+
+    /**
+     * Validate if the compensation should be processed
+     *
+     * @param string $sku
+     * @param CreditmemoItem $item
+     * @return bool
+     */
+    private function isValidItem(string $sku, CreditmemoItem $item): bool
+    {
+        /** @var OrderItemInterface $orderItem */
+        $orderItem = $item->getOrderItem();
+        // Since simple products which are the part of a grouped product are saved in the database
+        // (table sales_order_item) with product type grouped, we manually change the type of
+        // product from grouped to simple which support source management.
+        $typeId = $orderItem->getProductType() === 'grouped' ? 'simple' : $orderItem->getProductType();
+
+        $productType = $typeId ?: $this->getProductTypesBySkus->execute(
+            [$sku]
+        )[$sku];
+
+        return $this->isSourceItemManagementAllowedForProductType->execute($productType)
+                && $item->getQty() > 0
+                && !$item->getBackToStock()
+                && !$orderItem->getIsVirtual();
+    }
+}