I have 15 free slots when fully geared, which is not really enough for some activities. 12 seems very low. I don't know how often you get killed but I feel like potions are just a waste of inventory space unless you do a boss fight. Also 2 melee weapons should be enough.
I have basically the same setup but with 2 weapons and no potions.

Also I prefer having 100 wood arrows and 100 good arrows (frost or needle). For most enemies anything but wood arrows feels like a waste.

Axe and pickaxe are nice to have so you can gather resources for a forward base without going back to your main base. I only leave them in a chest when I'm doing some building.