ShirtTails is a clothing manufacturer that operates its own chain of discount retail stores. At the beginning of November 2008, ShirtTails is trying to plan its production of a new blouse that is worn...

ShirtTails is a clothing manufacturer that operates its own chain of discount retail stores. At the beginning of November 2008, ShirtTails is trying to plan its production of a new blouse that is worn primarily in the warmer months. Based on production constraints from other products, the company knows it has two opportunities to produce this blouse—in November 2008 and later in April 2009. The production capacity (for this blouse) is 1200 in November. In April, the capacity will increase to 2500. By April, demand for the blouses produced in November will be known. Using this information, ShirtTails will then be able to plan its production in April.

The unit cost of producing a blouse is $12, and the selling price will be $14. These remain constant. There is a $1 holding cost per blouse still in inventory after the pre-April demand. By November 2009, any remaining blouses in inventory will be sold at a markdown price of $4. (This is because ShirtTails plans to introduce a new blouse the next year.) Demand for the blouses before April is not known with any certainty, but ShirtTails believes it should be somewhere between 100 and 1000. After April, the demand for blouses is expected to be anywhere from 3 to 7.5 times as large as the demand before April. What production plan should the company use to maximize the expect profit from these blouses?

Objective To develop an optimization model that specifies production quantities of blouses in two time periods, where the second production quantity can be based on demand information from the first period.