—_— 170 CHAPTER 4 SOLVING LINEAR PROGRAMMING PROBLEMS: THE SIMPLEX METHOD @ CASES Case 4.1 Fabrics and Fall Fashions From the tenth floor of her office building, Katherine Rally watches the swarms of New Yorkers fight their ‘way through the streets infested with yellow cabs and the sidewalks littered with hot dog stands. On this swel- tering July day, she pays particular attention to the fash- ions worn by the various women and wonders what they will choose to Wear in the fall. Her thoughts are not sim- ply random musings; they are critical to her work since she owns and manages TrendLines, an elite women’s clothing company. ‘Today is a: especially amportant day oecause she must meet with Ted Lawson, the production manager, to decide upon next month's production plan for the fall line, Specifically, she must determine the quantity of each clothing iter she should produce given the plant’s production capacity, limited resources, and demand forecasts. Accurate planning for next month's produe- tion is critical to fall sales since the items produced next month will appear in stores during September, and ‘women generally buy the majority of the fall fashions ‘when they first appear in September. She tums back to her sprawling glass desk and looks at the numerous papers covering it. Her eyes roam across the clothing patterns designed almost six months ago, the lists of materials requirements for each pattern, and the lists of demand forecasts for each pattern de- termined by customer surveys at fashion shows, She re- members the hectic and sometimes nightmarish days of designing the fall line and presenting ita fashion shows in New York, Milan, and Paris, Ultimately, she paid her team of six designers a total of $860,000 for their work: on her fall line. With the cost of hiring runway models, iair scjlists, and makeup artists, sewing and ficing clothes, building the set, choreographing and rehearsing the show, and renting the conference hall, each of the three fashion shows cost her an additional $2,700,000. ‘She studies the clothing patterns and material re- quirements. Her fall line consists of both professional and casual fashions. She determined the prices for each clothing item by taking into account the quality and cost of material, the cost of iabor and machining, the de- mand for the item, and the prestige of the TrendLines brand name. ‘The fall professional fashions include: Labor and Clothing Fern Materlals Requirements Price Machine Cost Tallored woo! slacks 3 yards of wool 5300 si60 2 yards of acetate for fining Cashmere sweater 41.5 yards of cashmere $450 s1s0 Silk blouse 1.3 yards of sik 180 100 Silk camisole 0.5 yard of silk $120 560 veit--74 kin 2 yards nf =, ois $270 $120 1.3 yards of acetate for lining ‘Woo! biazer 2.5 yards of wool $320 s140 1.8 yards of acetate for lining ‘The fall casual fashions include: Labor and Clothing Item Materials Requirements Machine Cost Velvet pants 3 yards of velvet 5350 75 2 yards of acetate for lining Cotton sweater 15 yards of cotton 5130 $60 Cotton miniskirt 0.5 yard of cotton 375 $40 Velvet shirt 1.5 yards of velvet ‘5200 160 Button-down blouse 11.8 yards of rayon 5120 390——————— CASES ‘she knows that for the next month, she has ordered 45000 yards of wool, 28,000 yards of acetate, 9.000 jards oF cashmere, 18,000 yards of silks 30,000 yards ¥Frayon, 20,000 yards of velvet, and 30,000 yards of Sotton for production. The prices of the materials are 1s follows: a Materia Price per yard jin Reese Soh Woo! $ 9.00 ‘Acetate 51.50 Cashmere $60.00 sik 513.00 Rayon 5.2.25 Velvet $12.00 Cotten $250 ‘Any material that isnot used in production can be sent tack tothe textile wholesaler fora fall refund, although serap material cannot be sent back to the wholesaler. ‘She knows that the production of both the sille blouse and cotton sweater leaves Icftover scraps of ma- terial, Specifically, for the production of one silk blouse cor one cotton sweater, 2 yards of silk and cotton, re- spectively, are needed. From these 2 yards, 1.5 yards are used for the silk blouse or the cotton sweater and 05 yard is left as scrap material. She does not want to waste the material, so she plans to use the rectangular scrap of sill or cotton to produce a silk camisole or cot- ton miniskirt, respectively. Therefore, whenever 2 sill blouse is produced, a silk camisole is also produced Likewise, whenever a cotton sweater is produced, a cot- ton miniskict is also produced. Note that it is possible to produce a silk camisole without producing a silk blouse and a cotton miniskirt without producing a cot- ton sweater. ‘The demand forecasts indicate that some items have limited demand. Specifically, because the velvet pants and velvet shirts are fashion fads, TrendL ines has forecasted that it can sell only 5,500 pairs of velvet pants and 6,000 velvet shirts. TrendLines does not want to produce more than the forecasted demand because ‘once the pants and shirts go out of style, the company cannot sell them. TrendLines can produce less than the forecasted demand, however, since the company is not required to meet the demand. The cashmere sweater also has limited demand because it is quite expensive, and TrendL ines knows it can sell at most 4,000 cash- mere sweaters, The silk blouses and camisoles have limited demand because many wornen think silk is (00 hard to care for, and TrendLines projects that it can sell at most 12,000 silk blouses and 15,000 silk camiso a7 ‘The demand forecasts also indicate that the wool slacks, tailored skirts, and wool blazers have a great demand because they are basic items needed in every professional wardrobe. Specifically, the demand for ‘wool slacks is 7,000 pairs of slacks, and the demand or wool blazers is 5,000 blazers, Katherine wants t© eet at least 60 percent of the demand for these two items in order to maintain her loyal customer base and not lose business in the future. Although the demand for tailored skirts could not be estimated, Katherine feels she should make at least 2,800 of them. (a) Ted is trying to convince Katherine not to produce any velvet shirts since the demand for this feshion fad is quite qow, He argues that this fashion fad alone accounts for {$500,000 ofthe fixed design and other costs. The net con- tribution (price of clothing item ~ materials cost ~ labor ‘cost) from selling the fashion fed should cover these fixed costs, Each velvet shirt generates a net contsbution of $22. te argues that given the net contribution, even satisfying the maximum demand will not yield profit. What do you think of Ted's argument? @) Formulate and solve a linear programming problem 10 thaximize profit given the production, resource, and de mand constraints. Before she makes her final decision, Katherine plans to explore the following questions independently except where otherwise indicated (o) The textile wholesaler informs Katherine thatthe velvet cannot be sent back because the demand forecasts show the demand for velvet will decrease in the fitute. Katherine can therefore get no refund for the velvet. Hew does this fact change the production plan? (@) What is an inuitive economic explanation for the dif nee between the solutions found in parts (b) and (©)? (e) The sewing staf encounters difficulties sewing the arms and lining into the wool blazers since the blazer pattern hasan awkward shape and the neavy woo! material is dit Full t cut and sew. The increased labor time 10 ev! 8 ‘wool blazer increases the labor and machine cost for exch blazer by $80. Given this new cost, how many of each Clothing item should ‘TrendLines produce 10 maximize profit? (f) The textile wholesaler informs Ketherine that since another tentile customer eanceled his order, she can obtain an ex- tra 10,000 yards of acetate, How many of each clothing item should Trendl ines now produce to maximize prob? (@ TrendLines assumes that itcan sell every tem that was nat soid during September and October in a big sale in No- ‘ember at 60 percent ofthe orignal price. Therefore, it fan sell all items in unlimited quantity during the No- ember sale. (The previously mentioned upper limits on {emand concem only the sales during September and Oc- tober) What should the new production plan be to maxi- snize profit?