The Transshipment Problem

A transshipment problem, like transportation problem, involves sources having supplies, and destinations having
demands. In addition, however, it also involves junctions through which goods can be shipped. Such junctions may be
distinct from sources and destinations, and may act as a source-cum-junction or destination- cum- junction.

The transshipment problems are converted into transportation problem, for solution by VAM etc, by making every
junction both a source and a destination. Before starting the solution of the converted transportation problem, the
junctions are assigned with additional unit, which is equal to the total number of units in the system (i.e. the higher value
of total demand or total supply).

Ex: Solve the following transshipment problem. Locations 1 and 2 are sources, while locations 5 and 6 are destinations.
As shown both locations 3 and 4 are junctions. Locations 3 serves both as source and a junction, whereas location 4
serves both as a destination and a junction. Costs shown are unit transportation cost between two locations in Rs/unit,
wherever feasible.

Rs. 8
+15 Rs.
Rs. 3
+95 1 3 5 -30

Rs. 4
Rs. 2 Rs. 3

+70 2 4 6 -45
Rs. 7 Rs. 2
-30
Because total supply is 180 units [= 95 + 70 + 15], but total demand is only 105 unit [= 30 + 30 + 45], we create a
dummy destination D7 with artificial demand of (180 - 105) = 75 units. The data supplied for the transshipment
problem is tabulated as below:-

D4 D5 D6 D7 (Dummy) Supply
S1 NA 8 NA 0 95
S2 7 NA NA 0 70
S3 3 4 4 0 15
Demand 30 30 45 75 180

To convert the transshipment table into a transportation table, the two junctions 3 and 4 are assigned with additional
units of 180 units (i.e. the total number of units in the system), and also they are treated as both source as well as
destination). We get the revised transportation table as follows:-

D3 D4 D5 D6 D7 (Dummy) Supply
S1 3 M 8 M 0 95
S2 2 7 M M 0 70
S3 0 3 4 4 0 195
S4 M 0 M 2 0 180
Demand 180 210 30 45 75 540

Cost from a junction (as a source) to itself (as a destination) is zero; cost from any source to dummy D7 is zero; and we
assume unit transportation cost between two locations having nonexistent links as infinity or Big M.

We now solve the above transportation table by usual VAM and get the initial basic feasible solution as below:-

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 Initial basic feasible solution of the converted transportation table
D3 D4 D5 D6 D7 (Dummy) Supply
S1 3 M 8 M 0 95
20 75
S2 2 7 M M 0 70
70
S3 0 3 4 4 0 195
90 30 30 45
S4 M 0 M 2 0 180
180
Demand 180 210 30 45 75 540

We now test this IBFS for optimality,

Testing for the optimality of converted transportation table

ui
D3 D4 D5 D6 D7 (Dummy) Supply
S1 3 M 8 M 0 95 3
20 75
S2 2 7 M M 0 70 2
70
S3 0 3 4 4 0 195 0
90 30 30 45
S4 M 0 M 2 0 180 -3
180
Demand 180 210 30 45 75 540
vj
0 3 4 4 -3

The (cij – ui –vj) values for the nonbasic cells are as follows: S1D4 = M; S1D5 = 1; S1D6 = M; S2D4 = 2; S2D5 = M;
S2D6 = M; S2D7 = 1; S3D7 = 3; S4D3 = M; S4D5 = M; S4D6 = 1; S4D7 = 6, i.e. all of them are non-negative. Thus
the IBFS is optimal. We can present the optimal solution in pictorial form as:-

+15
20 30
+95 1 3 5 -30

70 45
30

+70 2 4 6 -45

Location 3 receives 20 units from location 1 and 70 units from-30 location 2, where upon it redistributes these units along
with its own initial supply of 15 units to location 4, 5 and 6 respectively. After all demands have been satisfied, location
1 will remain with 75 units.

The allocation x33 = 90 and x44 = 180 are book entries signifying the number of units that do not pass through junctions
3 and 4 respectively.

THE TRANSSHIPMENT MODEL (O R by H A Taha)

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The transshipment model recognizes that it may be cheaper to ship through intermediate or transient nodes before
reaching the final destination. This concept is more general than that of the regular transportation model, where direct
shipments only are allowed between a source and a destination. This section shows how a transshipment model can be
converted to (and solved as) a regular transportation model using the idea of a buffer.
Example: Two automobile plants, PI and P2, are linked to three dealers, D1, D2, and D3, by way of two transit centers,
T1 and 12, according to the network shown in Figure 5.7. The supply amounts at plants PI and P2 are 1000 and 1200
cars, and the demand amounts at dealers D1, D2, and D3, are 800, 900, and 500 cars. The shipping costs per car (in
hundreds of dollars) between pairs of nodes are shown on the connecting links (or arcs) of the network.
Transshipment occurs in the network in Figure 5.7 because the entire supply amount of 2200 (= 1000 + 1200) cars at
nodes PI and P2 could conceivably pass through any node of the network before ultimately reaching their destinations at
nodes D1, D2, and D3. In this regard, each node of the network with both input and output arcs (T1, T2, D1, and D2)
acts as both a source and a destination and is referred to as a transshipment node. The remaining nodes are either pure
supply nodes (PI and Pl) or pure demand nodes (D3).

The transshipment model can be converted into a regular transportation model with six sources (PI, Pl, T1, T2, D1, and
D2) and five destinations (T1, T2, D1, D2, and D3). The amounts of supply and demand at the different nodes are
computed as
Supply at a pure supply node = Original supply
Demand at a pure demand node = Original demand
Supply at a transshipment node = Original supply + Buffer amount
Demand at a transshipment node = Original demand + Buffer amount
The buffer amount should be sufficiently large to allow all of the original supply (or demand) units to pass through any
of the transshipment nodes. Let B be the desired buffer amount; then
B = Total supply (or demand) = 1000 + 1200 (or 800 + 900 + 500) = 2200 cars.
Using the buffer B and the unit shipping costs given in the network; we construct the equivalent regular transportation
model as in Table 5.44.

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The solution of the resulting transportation model (determined by TORA) is shown in Figure 5.8. Note the effect of
transshipment: Dealer D2 receives 1400 cars, keeps 900 cars to satisfy its demand, and sends the remaining 500 cars to
dealer D3.

Ex. Widgetco manufactures widgets at two factories, one in Mumbai and one in Delhi. The Mumbai factory can
produce as 150 widgets, and the Delhi factory can produce as many as 200 widgets per day. Widgets are shipped by air
to customers in Lucknow and Bangalore. The customers in each city require 130 widgets per day. Because of the
deregulation of airfares, Widgetco believes that it may be cheaper first fly some widgets to Chennai or Kolkata and then
fly them to their final destinations. The cost of flying a widget is shown in the following table. Widgetco wants to
minimize the total cost of shipping the required widgets to customers.

Chennai Kolkata Lucknow Bangalore

Mumbai Rs. 8 Rs. 13 Rs. 25 Rs. 28
Delhi Rs. 15 Rs. 12 Rs. 26 Rs. 25
Chennai Rs. 0 Rs. 6 Rs. 16 Rs. 17
Kolkata Rs. 6 Rs. 0 Rs. 14 Rs. 16
Solve the transshipment problem and calculate the optimal total cost.

Ans: Here the supply points are Mumbai, Delhi; demand points are Lucknow, Bangalore and the transshipment
points: are Chennai, Kolkata.

Rs. 25

Rs. 8 Rs. 16
+150 Mumbai Chennai Lucknow -130
Rs. 13 Rs. 14

Rs. Rs. 6
Rs. 15 6 Rs. 17

+200 Delhi Kolkata Bangalore -130

Rs. 12 Rs. 16
Rs. 25

Rs. 26
Rs. 28

To covert the transshipment table into a transportation table, the two transshipment points or junctions are assigned with
additional units of 350 units (i.e. the total number of units in the system = [150 + 200]), and also they are treated as both
sources as well as destinations. We get the revised transportation table as follows.

Destinations Chennai Kolkata Lucknow Bangalore Dummy Supply

Sources

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 Mumbai Rs. 8 Rs. 13 Rs. 25 Rs. 28 Rs. 0 150
Delhi Rs. 15 Rs. 12 Rs. 26 Rs. 25 Rs. 0 200
Chennai Rs. 0 Rs. 6 Rs. 16 Rs. 17 Rs. 0 350
Kolkata Rs. 6 Rs. 0 Rs. 14 Rs. 16 Rs. 0 350
Demand 350 350 130 130 90 1050

To find the initial feasible solution (IFS) as per VAM: Find out the difference between the smallest and second
smallest cost elements in each column and also in each row. Select the row or column with the maximum difference and
allocate as much as possible (keeping the restrictions of supply and demand in mind) to the least cost in the row or
column selected. In case of a tie, choose any one.
Table 1
Destination Row difference

Suppl
Chennai Kolkata Luckno Bangalor Dummy 1s 2n 3r 4tr 5t 6t
y
w e t d d h h h

Mumba
i 8 13 25 28 0 90 150 8
Source
Delhi
15 12 26 25 0 200 3
Chenna
i 0 6 16 17 0 350 0

Kolkat
a 6 0 14 16 0 350 0

35 35 13 13
Demand 90
0 0 0 0
1st 6 6 2 1 0
Colum 2nd
n 3rd
differe 4th
nce 5th
6th
Table 2
Destination Row difference
Balan
ce
Chennai Kolkata Luckno Bangalor 1s 2n 3r 4tr 5t 6t
Suppl
w e t d d h h h
y

Mumba
i 8 13 25 28 60 8 5
Source
Delhi
15 12 26 25 200 3 3
Chenna
i 0 6 16 17 350 0 6

Kolkat
35
a 6 0 14 16 350 0 6
0
35 35 13 13
Balance Demand
0 0 0 0
5
 1st 6 6 2 1 0
Colum 2nd 6 6 2 1
n 3rd
differe 4th
nce 5th
6th
Table 3
Destination Row difference
Balan
ce
Chennai Luckno Bangalor 1s 2n 3r 4tr 5t 6t
Suppl
w e t d d h h h
y

Mumba
1
i 8 60 25 28 60 8 5
Source 7
Delhi
15 26 25 200 3 3 10
Chenna
i 0 16 17 350 0 6 16

0 6
35 13 13
Balance Demand
0 0 0
1st 6 6 2 1 0
Colum 2nd 6 6 2 1
n 3rd 15 9 8
differe 4th
nce 5th
6th
Table 4
Destination Row difference
Balan
ce
Chennai Luckno Bangalor 1s 2n 3r 4tr 5t 6t
Suppl
w e t d d h h h
y

1
8 5
Source 7
Delhi
15 26 25 200 3 3 10 10
Chenna
29 1
i 0 16 17 350 0 6 16
0 6
0 6
29 13 13
Balance Demand
0 0 0
Colum 1st 6 6 2 1 0
n
2nd 6 6 2 1
differe
nce 3rd 15 9 8
4th 15 10 8
5th

6
 6th
Table 5
Destination Row difference
Balan
ce
Luckno Bangalor 1s 2n 3r 4tr 5t 6t
Suppl
w e t d d h h h
y

1
8 5
Source 7
Delhi
26 25 200 3 3 10 10 1
Chenna
1
i 16 60 17 350 0 6 16 1
6
0 6
13 13
Balance Demand
0 0
1st 6 6 2 1 0
Colum 2nd 6 6 2 1
n 3rd 15 9 8
differe 4th 15 10 8
nce 5th 10 8
6th
Table 6
Destination Row difference
Balan
ce
Luckno Bangalor 1s 2n 3r 4tr 5t 6t
Suppl
w e t d d h h h
y

1
8 5
7
Source
Delhi 13
26 70 25 200 3 3 10 10 1
0
1
0 6 16 1
6
0 6
13
Balance Demand 70
0
1st 6 6 2 1 0
Colum 2nd 6 6 2 1
n 3rd 15 9 8
differe 4th 15 10 8
nce 5th 10 8
6th
So the initial allotment as per VAM becomes as follows: -
Table 7
Destination Suppl
Chennai Kolkata Luckno Bangalor Dummy y

7
 w e

Mumba
i 8 60 13 25 28 0 90 150
Source
Delhi 13
15 12 26 70 25 0 200
0
Chenna
29
i 0 6 16 60 17 0 350
0
Kolkat
35
a 6 0 14 16 0 350
0
35 35 13 13
Demand 90
0 0 0 0

Test for Degeneracy: Here the number of allotment is only seven instead of eight i.e. (m + n – 1 = 5 + 4 – 1 = 8). So to
get the IFS, we arbitrarily allot 0 unit to x22 cell. Thus the IFS becomes:
Table 8 - IFS
Destination
Chennai Kolkata Luckno Bangalor Dummy Suppl
w e y

Mumba
i 8 60 13 25 28 0 90 150
Source
Delhi 13
15 12 0 26 70 25 0 200
0
Chenna
29
i 0 6 16 60 17 0 350
0
Kolkat
35
a 6 0 14 16 0 350
0
35 35 13 13
Demand 90
0 0 0 0

Test for optimality: For each basic variable, set ui + vj = cij. Then find for each non-basic variable
the value of (cij – ui – vj). If all such values are non-negative, the optimal solution has been
achieved.
Table 9 – setting of ui and vj values
Destination
Chennai Kolkata Luckno Bangalor Dummy Suppl
ui
w e y

Mumba
i 8 60 13 25 28 0 90 150 -2
Source
Delhi 13
15 12 0 26 70 25 0 200 0
0
Chenna 0 29 6 16 60 17 0 350 -1

8
 i 0 0

Kolkat 6 0 35 14 16 0 350 -1
a 0 2

35 35 13 13
Demand 90
0 0 0 0
vj 10 12 26 25 2
Table 10 – (cij – ui – vj) values for non-basic variables
Destination
Chennai Kolkata Luckno Bangalor Dummy Suppl
ui
w e y

Mumba 8 60 13 25 28 0 90
i 150 -2
3 1 5
Source 13
Delhi 15 12 0 26 70 25 0
0 200 0
5 -2
Chenna 29
0 6 16 60 17 0 -1
i 0 350 0
4 2 8
Kolkat 35
6 0 14 16 0 -1
a 0 350 2
8 0 3 10
35 35 13 13
Demand 90
0 0 0 0
vj 10 12 26 25 2
(cij – ui – vj) values, hence the IFS is not optimal. We have to modify the
Since x22 cell has negative
solution for improvement.
Modification of the IFS:
Destination
Chennai Kolkata Lucknow Bangalor Dummy Suppl
e y

Mumbai 8 60 13 25 28 0 90
150
3 1 5
Source 13
Delhi 15 12 0 26 70 25 0
0 200
5 -2
29
Chennai 0 6 16 60 17 0
0 350
4 2 8
Kolkata 35
6 0 14 16 0 350
0
For modification of the IFS, we form a loop as shown below. Note the loop is formed out of only basic variables except
one (which will be the next basic variable).

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 8 + 60 13 25 28 0 - 90
3 1 5
15 12 0 26 - 70 25 130 0 +
5 -2
0 - 290 6 16 + 60 17 0
4 2 8
By maximum reduction possible in cell x23 i.e. by 70 units we get the modified solution as
Table 11 – Modified solution
Destination
Chennai Kolkata Luckno Bangalor Dummy Suppl
w e y

Mumba
13
i 8 13 25 28 0 20 150
0
Source
Delhi 13
15 12 0 26 25 0 70 200
0
Chenna
22
i 0 6 16 60 17 0 350
0
Kolkat
35
a 6 0 14 16 0 350
0
35 35 13 13
Demand 90
0 0 0 0

Retest for Optimality:

Table 12– Retest for Optimality - setting of ui and vj values
Destination
Chennai Kolkata Luckno Bangalor Dummy Suppl
ui
w e y

Mumba
13
i 8 13 25 28 0 20 150 0
0
Source
Delhi 13
15 12 0 26 25 0 70 200 0
0
Chenna
22
i 0 6 16 60 17 0 350 -8
0
Kolkat
35 -1
a 6 0 14 16 0 350 2
0
35 35 13 13
Demand 90
0 0 0 0
vj 8 12 24 25 0
Table 13– Retest for Optimality; (cij – ui – vj) values for non-basic variables
Destination Suppl ui
y

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 Chennai Kolkata Luckno Bangalor Dummy
w e

Mumba 13
8 13 25 28 0 20
i 0 150 0
1 1 3
Source
13
Delhi 15 12 0 26 25 0 70
0 200 0
7 2
Chenna 22
0 6 16 60 17 0
i 0 350 -8
2 0 8
Kolkat 35
6 0 14 16 0 -1
a 0 350 2
10 2 3 12
35 35 13 13
Demand 90
0 0 0 0
vj 8 12 24 25 0
Since all cells have non-negative (cij – ui – vj) values, hence the modified solution is optimal. The optimal
solution as: -
Chennai Kolkata Lucknow Bangalore Dummy Supply
Mumbai Rs. 8 130 Rs. Rs. Rs. Rs. 0 20 150
13 25 28
Delhi Rs. Rs. 0 Rs. Rs. 130 Rs. 0 70 200
15 12 26 25
Chennai Rs. 0 220 Rs. 6 Rs. 130 Rs. Rs. 0 350
16 17
Kolkata Rs. 6 Rs. 0 350 Rs. Rs. Rs. 0 350
14 16
Demand 350 350 130 130 90 1050
Conclusion: 130 widgets per day from Mumbai will first go to Chennai and then from Chennai those will go to
Lucknow. But 130 widgets per day from Delhi will straightway go to Bangalore. Nothing will come to or go from
Kolkata. Clearly 20 and 70 widgets per day will not be dispatched from Mumbai and Delhi respectively.
Total cost = Rs. 8 x 130 + Rs. 16 x 130 + Rs. 25 x 130 = Rs. 49 x 130 = Rs. 6,370.

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