Before starting the Setup, please check the below points:
1. Make sure, Master Org is defined in BOM Parameters.
2. Make sure, Master Org is defined in "OE: Item Validation Organization" profile option.
Steps:
1. Define a Kit item as KIT_ITEM, using Kit Template, with item attribute PICK COMPONENT.


2. Define two items KIT_COMP_1 and KIT_COMP_2 as Purchased Items which will be INCLUDED in Kit (i.e., KIT_ITEM) using BOM.
3. Add KIT Item and INCLUDED Items in the Price List.
4. Create BOM in Master Organization using KIT_ITEM and assign two items KIT_COMP_1 and KIT_COMP_2 in it with quantity 1 each.

5. The above created BOM should be copy to the Inventory Organization.
6. Create Sales Order for KIT_ITEM with quantity 1.
7. Book order and check if included items are shown via TOOLS -->show line detail.
8. Go to Shipping Transaction Form, here we can see INCLUDED items with status "Ready to Release" and you will not find Kit Item because KIT Item is not Shippable.
9. select INCLUDED Items and Launch Pick Release.
10. Select Delivery Number and do Ship Confirmation. Message displays "Delivery Successfully Ship Confirm".