1) It has to be simple with very little bookkeeping
2) Players have to occasionally make tough, interesting decisions on what they carry
3) The PC’s strength should impact their encumbrance
You have a number of inventory slots equal to your Strength score, if you have a Strength of 12, you have 12 slots to fill with stuff. Slots are a measurement of weight, size, and volume - use common sense here, we are not building the Space Shuttle. A number of your inventory slots equal to half of your Dexterity score are Fast Inventory. These are items that you can reach instantly--hanging from your belt, in a scabbard, etc. Everything else is in your backpack, and takes 1d6 rounds to dig out, or 2d6 rounds if you want to avoid scattering shit all over the floor.
If half your available slots are occupied, you are half encumbered and move a little slower than normal (instead of 12 movement rate you go to 9, etc). If all your slots are occupied you are encumbered and move at ½ your normal rate. Using additional slots result in your character staggering around as if he was carrying a couch or refrigerator. Also, you can barely defend yourself.
General rules (again, use some common sense here):
- Armor takes up a number of slots equal to the effect on AC score*: plate raises AC by 6, thus is takes up six slots, leather raise by 2 means it occupies 2 slots. Most shields take one unless they are those giant
- If you can pick it up easily with one hand and use it, the item takes up one slot. A long sword, a lantern, a shield, and an ax are all good examples.
- If you need two hands to effectively use it, it takes up 2 slots. Pole arms, 10’ poles, two handed swords, and battle axes.
- If you can pick up a bunch of the items with one hand, these are Bundles and count five items to one. Most spell components, sling stones, torches, vials of oil fall into this category.
- Arrows are collected into Sheaves of 20 to a quiver which takes one slot.
- Coins. 200 gold or silver coins can be carried in a bag or pouch.
* I use ascending Armor Class rules. I am old, this is easier for my tired brain.
Most of this is derived from this post on Goblin Punch: