Since many can agree that inventory is small and certain items take up the hands of the character to expand your inventory preventing you from using a tool, because then it would make your inventory smaller.
So my suggestion is to be able to use the tool as long it is in your inventory.
For example if you have traveller's sack in your both hands, you still would be able to use your axe in your invenotry to chop things or other things that require an axe.
What do you guys think, wouldn't it make our life easier when we are travelling a long distance, like for example questing and running into issue of having inventory too small, because you just need to have that axe equipped or that fishing rod.