Last year I used inventory to report my craft business. Can I change from Inventory reporting to supply and income reporting this year?

Yes, you are not required to keep inventory unless your business gross receipts average $30 million a year over the last 3 years.  

In TurboTax, you can report these costs in the inventory section as COGS or in the expenses section as supplies. Either way, you don't have to report inventory but you do need to carefully track what you paid for the products, materials, and supplies that go into your inventory.