Does deleting a shipment return picked items to inventory?

It's very common, in DBA, for users to associate item picking with shipment creation because the software has a "shortcut" step where, when a shipment is created, the system automatically checks for picked items and, if nothing is currently picked, it will automatically launch the Order Picking screen.  This makes sense because a shipment cannot be empty of items to ship.  For a lot of users, though, this implies that item picking and shipment creation are the same process.

In reality, these are two separate processes and the system cannot make the reverse assumption (that because you're deleting the shipment you also need to un-pick items back into inventory).  The reason is because the shipment being deleted may simply imply a problem with the shipment details and may not necessarily imply that items are being put back into inventory.  In some cases, the shipment might need to be re-created with the correct details and there is no desire to put the items back into inventory.

So, after deleting a shipment, if you need to return quantities back into inventory then you'll need to change the order status (in the 'Header' tab) to 'ORDERED', launch (Sales > Order Picking), choose the SO No you're working with, select the line item you wish to return, and click the 'Transactions' subtab.  This tab will show you your previous pickings for the line chosen.  From there, you can highlight the transaction you wish to reverse and click the 'Return' button.

Please be aware that this may not be a common process for most situations.  If, for example, an item is being returned as part of an RMA then you should follow the process outlined in the RMA training course.  It covers how to return used items, perform repair Jobs, and more.  The process outlined above would only be relevant to absolutely new items where placing them back into inventory, which co-mingles them with existing inventory, is not a problem