$$ Stock Turns and Availability:

$$ Excessive Stock: The current re$-$order quantities are based on estimates from the Estimating Department and were established several years ago. This may result in excess stock, as demand patterns may have changed over time. For example, the $20\%$ of products that are highly seasonal may lead to overproduction during off$-$peak seasons.

$$ Insufficient Stock: On the other hand, some products may be understocked, leading to delays in fulfilling customer orders.

$$ Storage Issues: The warehouse is currently overcrowded, with products stacked on the floor, making it vulnerable to damage. This indicates a mismatch between storage capacity and inventory levels.

$3.$ Recommendations for Warehouse Extension:

$$ Approval of Warehouse Extension: Given the current storage space constraints and the associated costs of contract warehousing, it is advisable to proceed with the construction of the warehouse extension.

$$ Timing of Construction: The construction should ideally take place in June$$September$,$ as planned, to alleviate the current storage issues and prevent potential production stoppages due to lack of space.

$$ Review of Re$-$Order Quantities: While waiting for the extension, TEP should conduct a thorough review of re$-$order quantities for all products. This will help optimize inventory levels and improve service levels to customers.

$$ Consideration of ROI: The return on investment for the warehouse extension project is well above the company's current cost of capital. This suggests that the project is financially sound and will likely bring substantial benefits in terms of reduced storage costs and improved operational efficiency. Therefore, it is recommended to move forward with the investment.

Overall, these recommendations aim to address the current operational challenges, improve delivery reliability, and enhance the overall efficiency of TEP's operations.