Problem
The National Tire Company (NTC) manufactures only one type of tire and wants to plan its production and inventory levels for the next five months. The following table provides the relevant data for each month, where the inventory level requirements refer to the level at the end of each month. Other relevant information is as follows:
• NTC estimates that it costs $1 to hold one tire in inventory from one month to the next;
• NTC currently has an inventory level of 4000 tires;
• NTC wants to meet its demand with no backorders (that is, all demand must be met no later than the month in which it occurs).
Write down your optimization model and build a spreadsheet model to figure out production and inventory levels that minimize total cost.