It may simply not be programmed to be usable outside of battle. This may be because the game is still in its early stages, or because overworld moves were removed in gen VII and the game wants to reflect that. Though, normally, you don't use overworld moves through key items. To use them. you'd go to the Party screen, select the Pokemon, and one of the options should be the move name, in this case Milk Drink, and you would select that to use it.