If you run out of food, your party will suffer a morale penalty and your companions may openly criticize your leadership ability or threaten to leave. As time passes, your party will consume your food until it is gone. Items in your inventory will also slow party movement speed on the world map, this can be countered by keeping a horse in your inventory to act as a pack mule. When starting you will only be able to carry about 18 items, increasing the Inventory Management skill will allow an extra 6 items, per rank, to be carried.
All unequipped items are kept in the players Inventory.