Not quite sure why you are using dynamic sql in the middle of your cursor. I am very confused by the case expression in your update. You either use the value from inv_header or the value in your variable (which also came from inv_header). Since we don't have that table to work with and there is no data it is hard to know for sure but I think those two values would always be the same thing???

Something like this should be a decent starting point for replacing your cursor. I may be over simplifying it but without structures to work with it is impossible to test.

update #inv

set Phys_Inv_Date = h.call_date

from #inv i

INNER JOIN inv_header h ON i.rep_id = h.rep_id

WHERE h.Phys_Inv_Date IS NULL

and inv_type = 'physical'