assuming you are using MS Sql Server 2005 or later try this:
update ise set
ISE.ORACLE_ON_HAND = ca.on_hand_quantity_sum
from XXINV.XXINV_ITEM_SNAP_EGS_E5A6 ISE
cross apply (
select sum(dvd.on_hand_quantity) on_hand_quantity_sum
from apps.XXRPT_INV_VALUATION_D535_V IVD
where ivd.item_number = ise.item_number
) ca
Be One with the Optimizer
TG