For me, how much inventory I keep on hand is about managing how much control I have over my time. I don’t like when I /have/ to drop my schedule and make orders to keep up so I work not to put myself in that position.
So, I have maybe 70% pre-made and 30% personalizable items in my store. The pre-made stuff, I keep a week’s worth of inventory on hand. That’s 2 to 8 of each item depending on how popular it typically is. This way I only spend 1-2 days a week restocking what was sold recently to maintain that inventory level, and I can choose what days I feel like doing that.
For the personalizable items, I pre-make all the components that can be pre-made and stock those. I then just need to pop in a blank and do the final engraving or what have you to finish it when ordered.
I also keep 30 days worth of materials packaging on hand. There were times last year when it took weeks to get a shipment of wood or bubble wrap or shipping boxes in. So now I always have enough wood, acrylic, bubble wrap, packing paper, shipping boxes, shipping tape, printer paper, toner, etc to go a month without a restock so I can wait a month if needed. Half my dining room is filled with 50 packs of shipping boxes in various sizes, 200 foot rolls of bubble wrap, unopened boxes of wood, etc. When I e.g. use up a 50 pack of some shipping box size, I grab another 50 pack from that stock and order another 50 pack to replace it then.
It does increase my taxes a few dollars a year. My city has a “business personal property tax”, and taxes me on the value of all property held by the business. Meaning every pen and paperclip, every shelf, the value of my Glowforge and its foil ducting, etc.