CHAPTER III

DISTRIBUTION MODELS

One important application of linear programming has been in the area of the physical
distribution (transportation) of resources, from one place to another, to meet a specific
set of requirement.

This chapter describes two special –purpose algorithms: the transportation model and
the assignment model. Model formulation and manual solution are covered for each of
these classes of problems.

Both transportation and assignment problems are members of a category of linear

programming techniques called network flow problems.

3.1. TRANSPORTATION PROBLEMS

Transportation problem deals with the distribution of goods from several points of
supplies (sources) to a number of points of demands (destinations).

Consider a corporation engaged in the manufacture of products. Most of such big

corporations are of “multiple-product” and “multi-unit” organizations having
production units situated at different places. Items are produced for sales. Sales take
place at different markets which are, again located at different places. It is not feasible to
co-locate production and market. Markets are located away from the manufacturing
places. Hence products are sent to factory warehouses set up near market outlets. Cost
of product consists of production cost and distribution cost.

Cost of product = production cost + distribution cost

Distribution cost consists of mainly the transportation cost of items from its
production (manufacturing) center to the warehouses. Transportation techniques are
designed to minimize the distribution costs. In order to identify products, it is necessary
to work out per unit distribution cost of each product. We also know the production
capacity of each product in each factory is fixed. The holding capacity of a warehouse or
potential sales in each marketing center is again a fixed quantity which cannot be
exceeded.

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The characteristics of transportation problem are as follows:
1. A limited supply of one commodity is available at certain sources or origins.
2. There is a demand for the commodity at several destinations
3. The quantities of supply at each source and the demand at each destination are constant.
4. The shipping or transportation costs per unit from each source to each destination are assumed
to be constant.
5. No shipments are allowed between sources or between destinations. All supply and demand
quantities are given in whole number or integers.
6. The problem is to determine how many units shipped from each source to each destination so
that all demands are satisfied at the minimum total shipping costs.

 Uses of transportation techniques:

1. Reduce distribution or transportation cost
2. Improve competitiveness of product
3. Assist proper location of warehouses
3. Assist proper location of new factories or plants being planned.
4. Close down warehouses which are found costly and uneconomical.

 The objective of transportation problem is:

1. To identify the optimal shipping routes-minimum cost route
2. To identify the maximum amount that can be shipped over the optimum route
3. To determine the total transformation cost or the profit of transportation

3.1.1. The Transportation Method

The solution algorithm to a transportation problem may be summarized into the
following steps:

Step 1:
Formulate the problem and set up in the matrix form
The formulation of the problem is similar to the linear programming. Here the objective
function is the total transportation cost and the constraints are the supply and demand
available at each source and destination respectively.

Step 2:
Obtain an initial basic feasible solution

2
There are 3 methods to find the initial feasible solution.

1. North-West Corner Method (NWCM)

2. Least Cost Method (LCM)
3. Vogel’s Approximation Method (VAM)
The initial solution obtained by any of the three methods must satisfy the following
condition:

i. The solution must be feasible

i.e.: It must satisfy all the supply and demand constraints

ii. The number of positive allocations must equal to m+n-1, where m=the
number of rows (or origins or supply centers) and n= the number of columns(or
destination centers or demand centers)
Example:
m=3 origins and n=4 destinations ==>m+n-1=3+4 -1=6 (i.e. the transportation model
should have 6 occupied cells).

Note:
The number of occupied cells < m+n-1==> degenerate solution

Step 3:
Test the initial solution for optimality
If the current solution is optimal, then stop. Otherwise, determine the new
improved solution.
Step 4:
Repeat step 3 until an optimal solution is reached

3.1.2. Linear programming formulation of the transportation problem

Example
Suppose that a firm has three factories /sources of supply/ & four warehouses /point of
demand/. The firm's production capacity at the three factories, the demand for the four
distribution centers located at various regions & the cost of shipping each unit from the
factories to the warehouses through each route is given as follows:

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 Destinations (dd) =j

Origin Factory
(Supply) W1 W2 W3 W4 Capacity =i
Br.3 2 7 6
F1 5000
7 5 2 3 6000
F2
2 5 4 5
F3 2500
Requirements of the
Warehouses 6000 4000 2000 1500 13500
( Units of demand)

Using all the above information

i. Express the following transportation problem as an LPP
Solution
Let xij =The amount of commodity to be transported form source i (i =1,2,3 ) to
destination j( j= 1,2,3,4).
Then the objective function of the problem (minimization of the total transportation cost)
can be formulated as:

MinZ = 3x11 +2x12 + 7x13 +6 x14 +

7x21 +5x22 +2x23 + 3x24 +
2x31+5x32 +4x33+5x34
Subject to the constraints
a. Supply constraints:
x11 +x12 +x13 +x 14 =5000 F1 supply constraint
x21 + x22 + x23 +x24 =6000 F2 supply constraint
x31 +x32 +x33+x34 = 2500 F3 supply constraint
b. Demand constraints:
x11 + x21 + x31 = 6000 W1 demand constraint
x12 + x22 + x32 = 4000 W2 demand constraint
x13 + x23 +x33 = 2000 W3 demand constraint
x14 +x24 + x34 = 1500 W4 demand constraint
xij > 0 for all i& j
In the above LPP, there are m x n = 3x4 =12 decision variables & m + n = 3+4 =7
constraints. Thus, if this problem is solved by the simplex method, then it may take
considerable computational time.

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ii. The network representation of the transportation LPP is called Net work flow

Origin Destination centers

(Sources of Supply) (Point of demand centers)

3
F1 50000 W1 6000
2
6 7
7

F2 6000 5 W2 4000
2
3
W3 2000
2 5
4
F3 2500 5 W4 1500

This LPP has 12 shipping routes. The objective is to identify the minimum cost route
(Least cost route).

3.2. METHODS OF FINDING INITIAL FEASIBLE SOLUTION

There are several methods available to obtain an initial feasible solution. Here we shall
discuss only three different methods to obtain the initial feasible solution:

A. NORTH-WEST CORNER METHOD (NWCM)

This method does not take into account the cost of transportation on any route of
transportation.

The NWCM gets its name because the starting point for the allocation process is the
Upper Left-hand (Northwest) corner of the transportation table. Therefore, allocate to
the Northwest corner as many units as possible.

Northwest corner rule

The following set of principles guides the allocation:
1. Begin with the upper left hand cell (Left, upper most in the table), & allocate as many
units as possible to that cell. This will be the smaller amount of either the row supply
or the column demand. Adjust the row & column quantities to reflect the allocation.
2. Subtract from the row supply & from the column demand the amount allocated

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3. If the column demand is now zero, move to the cell next to the right, if the row supply
is zero, move down to the cell in the next row.
If both are zero, move first to the next cell on the right then down one cell.
4. Once a cell is identified as per step (3), it becomes a northwest cell. Allocate to it an
amount as per step (1)
5. Repeat, the above steps (1) - (4) until all the remaining supply and demand is gone.
Example:
1) Consider the following transportation problem:

To
Store 1 Store 2 Store 3 Store 4 Supply
From

Plant 1 19 30 50 10
7
70 30 40 60
Plant 2 9
40 8 70 20
Plant 3 18

5 8 7 14 34
Demand

a. Develop an initial feasible solution using the NWCM

b. Compute the total cost for this solution.
Solution
a. Table: Initial feasible solution
To
Store 1 Store 2 Store 3 Store 4 Supply
From

Plant 1 19 30 50 10
5 2 7
70 30 40 60
Plant 2 6 3 9
40 8 70 20
Plant 3 4 14 18

5 8 7 14 34
Demand

Check that the solution is feasible or not:

==>m + n-1; m=3 and n=4  3+4-1= 6 cells occupied (Feasible solution)

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The total transportation cost of the initial feasible solution derived by the NWCM is:

Route Unit Per unit Total

From To Shipped X cost ( $) = Cost ( $)
Plant 1 Store 1 5 19 95
plant 1 Store 2 2 30 60
Plant 2 Store 3 6 30 180
Plant 2 Store 4 3 40 120
Plant 3 Store 4 4 70 280
Plant 3 Store 4 14 20 280
Total Cost= $ 1015

Note: NWCM does not consider the cost factor for allocation.

Exercise:
1. Determine an initial basic feasible solution to the following transportation problem
using NWCM. Compute the total cost for this solution

Destination
A B C Supply
S1 2 7 14 5
S2
3 3 1 8

S3 5 4 7 7
S4 1 6 2 14
Demand 7 9 18

Answer: X11=5, X21=2, X22=6, X32=3, X33=4, X43=4, and Total cost =$102

Note:
1. Total Supply= Total demand ===> Balanced TP
2. Total Supply ≠ total demand ===> Unbalanced TP
3. Convert the unbalanced TP into a balanced TP by using dummy destination/dummy
source.
* If total Supply > Total demand, then create a fictitious or artificial destination
called dummy destination

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 i.e: total Supply > Total demand===> Add dummy column

* Excess demand (Supply < demand)

- Add a dummy source
- Add a dummy row
Note: the cost of “shipments” to the dummy is usually set at zero ==> No real cost

Example
Develop an initial feasible solution using NWCM
Table: Unbalanced transportation table
R S T Supply
A 1 2 3 100
B
4 1 5 110

Demand 80 120 60 210

260

Solution:
R S T Supply
1 2 3
A 100
80 20
4 1 5
B 110
100 10
0 0 0
Dummy 50
50
Demand 80 120 60 260

Answer:X11=80, X12=20, X22=100, X23=10, X33=50 Total cost =$270

Assignment
Consider that Harley's Sand & Gravel Pit has contracted to provide topsoil for three
residential housing developments. Topsoil can be supplied form three different “farms"
as follows:
_________________________________________________________________
Weekly Capacity
Farm (Cubic Yards)
A 100
B 200
C 200

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 _________________________________________________________________

Demand for the topsoil generated by the construction projects is:

_____________________________________________________________
Weekly Demand
Project (Cubic Yards)
1 50
2 150
3 300
_________________________________________________________________
The manager of the sand & gravel pit has estimated the cost per cubic yard to ship over
each of the possible routes:
_________________________________________________________________
Costs per cubic yard to
From Project # 1 Project #2 Project #3
Farm A $4 $2 $8
Farm B 5 1 9
Farm C 7 6 3

_________________________________________________________________
Required
Develop the initial feasible solution using NWCM & compute the total cost for this
solution.

B. THE LEAST- COST METHOD (LCM) or

(LARGEST- PROFIT) METHOD
LCM is the method used a minimum cost in the allocation.
It begins a solution by sequentially assigning to the ratios or cells with the minimum cost
as many units as possible. The first allocation be made to the cell with the lowest cost
(the highest profit in a maximization case)
The Least- Cost Method yields not only an initial feasible solution but also one that is
close to optimal in small problems.

Example

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1.Suppose that a firm has three factories / sources of supply /& four warehouses/point of
demand/. The firm's production capacity at the three factories, the demand for the
four destination centers located at various regions & the cost of shipping each unit
from the factories to the warehouses through each route is given as follows:
Destinations
Factory
W1 W2 W3 W4 Capacity
F1 3 2 7 6 5000
F2 7 5 2 3 6000
F3 2 5 4 5 2500
Demand 6000 4000 2000 1500 13500

Required:
a. Develop an initial feasible solution using NWCM & Compute the total cost
b. Develop an initial feasible solution using least-cost method & compute the total cost.
[

Solution:
Initial feasible solution
Factory
W1 W2 W3 W4 Capacity
F1 3 2 7 6
5000
5000
Factory
7 5 2 3
F2 6000
1000 4000 1000
2 5 4 5
F3 2500
1000 1500
Demand 6000 4000 2000 1500 13500

m= 3, n =4 ==> 3+4 -1 =6 occupied cells (Feasible)

Routes Units Unit Total

From To Shipped X Cost =Cost
F1 W1 5000 3 $ 15000
F2 W1 1000 7 7000
F2 W2 4000 5 20000
F2 W3 1000 2 2000
F3 W3 1000 4 4000
F3 W4 1500 5 7500
Total transportation cost =$55,500

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b.
Factory
W1 W2 W3 W4 Capacity
3 2 7 6
F1 5000
1000 4000
7 5 2 3
F2 6000
2500 2000 1500
2 5 4 5
F3 2500
2500
Demand 6000 4000 2000 1500 13500

Routes Units Unit Total

From To Shipped X Cost =Cost
F1 W1 1000 3 $ 3000
F1 W2 4000 2 8000
F2 W1 2500 7 17500
F2 W3 2000 2 4000
F2 W4 1500 3 45000
F3 W1 2500 2 5000
Total transportation cost =$42,000

m= 3, n=4 ==> 3+4-1 =6 occupied calls (Feasible)

Least- Cost method is better than the NWCM because it considers cost factors.

2. Develop the initial feasible solution for the following TP using the least-cost method
(LCM)

Destination
D E F G Supply
Source
A 1 5 3 4 100
B 4 2 2 5 60
C 3 1 2 4 120
demand 70 50 100 60 280

Solution

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The 1st allocation be made to the cell with the least-cost. Cells AD & CE both have the
lowest cost of $1. Cell AD is selected 1st because more units can be allocated to it (70)
than to cell CE (50).

Cell CF is filled in 1st since a larger quantity (120-50-70) can be placed there. Then, the
remaining requirement of 30 for column F is allocated to cell BF & source B's supply is
reduced to 30.

The initial solution by the least -cost method

D E F G Supply
Source
A Destination 1 5 3 4 100
70 30
B 4 2 2 5 60
30 30
C 3 1 2 4 120
50 70
demand 70 50 100 60 280

m=3, n=4 ==> 3+4-1 = 6 occupied cells (feasible)

Routes Units Unit Total

From To Shipped X Cost =Cost
A D 70 1 $ 70
B F 30 2 60
B G 30 5 150
C E 50 1 50
C F 70 2 140
A G 30 4 120
Total transportation cost 590
3. Develop an initial feasible solution using LCM
R S T Supply

A 1 2 3 100
B 4 1 5 110
Demand 80 120 60

Solution

R S T Supply

A 1 2 3 100
80 10 10

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 B 4 1 5 110
110
Dummy 0 0 0 50
50
Demand 80 120 60

Total transportation cost=80x1+10x2+10x3+110x1+50x0=$240

Exercise
Three garment plants are available for monthly education of four styles of men's shirts.
The capacities of the three plants are 45,000, 93,000 and 60,000 shirts. The number of
shirts required in style "a" through "d" are 28,000, 65,000, 35,000 & 70,000, respectively.
The profits, in $ per shirt, at each plant for each style are shown below.

Table: The garment plants' profit.

STYLE a b c d
PLANT
1 8 12 -2 6

2 13 4 3 10

3 0 7 11 8

How many shirts of each type to produce in each plant so that profit is maximized?

Answers: Total profit= $2,119,000

(Hint: Select the largest per unit profit, first & use largest-profit method)

2. Determine an initial feasible solution to the following transportation problem

using LCM

A B C D Supply
S1 1 5 3 3 34

Source
S2 3 3 1 2 15
S3 0 2 2 4 12
S4 2 7 2 4 19
demand 21 25 17 17

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C. VOGEL'S APPROXIMATION METHOD (VAM)
or
PENALTY METHOD
VAM is preferred to the other two methods described above. In this method each
allocation is made on the basis of the opportunity (or penalty or extra) cost that would
have incurred if allocation in certain cells with minimum unit transportation cost were
missed.

In this method allocation are made so that the penalty cost is minimized. The advantage
of this method is that it gives an initial solution which is nearer to an optimal solution or
is the optimal solution itself.

VAM determines the penalty for not using the minimum cost routes, where the objective
is to avoid large penalties so that the penalty from not using the routes is minimized.
The steps in VAM are as follows:
1. Calculate penalties for each row (column) by taking the smallest & the next smallest
unit transportation cost in the same row (column)
This difference indicates the penalty or extra cost which has to be paid if one fails
to allocate to the cell with the minimum unit transportation cost

2. Select the row or column with the largest penalty & allocate as much unit as possible
in the cell having the least cost in the selected row or column satisfying the
conditions.
If there is a tie in the values of penalties, then t can be broken by selecting the cell
where maximum allocation can be made.
3. Adjust the supply & demand & cross out the satisfied row or column
If a row or column is satisfied simultaneously, only one of them is crossed out &
the remaining row (column) is assigned a zero supply (demand) .Any row or column
with zero supply or demand should not be used in computing future penalties.
4. Repeat step 1 to 3 until the entire available supply at various sources & demand at
various destinations are satisfied.
Example:
1. Determine an initial basic feasible solution to the following transportation problem
using VAM.

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 Warehouse
A B C D Supply Row difference or Row penalty
or opportunity cost
Factory F1 2 2 0 4
25
5 20 2 0 - - -

F2 5 9 8 3
25 2 2 2 2 5
15 5 5
F3 6 4 3 2
10 1 2 2 - -
10
Demand 20 15 20 5 60

Column difference 3 2 3 1
or Column penalty
or opportunity cost 3 2 - 1

1 5 - 1

5 9 - -

5 - - -
m= 3, n=4 ==> 3+4-1 =6 Occupied cells (feasible)
The transportation cost associated with this solution is:
Total cost= 5x2 + 20x0+15x5x9 =+95x3+10x4= $185
2. A dairy firm has three plants located in different regions. The daily milk production at
each plant is as follows:
Plant 1: 6 million liters.
Plant 2: 1 million liters, &
Plant 3: 10 million liters
Each day the firm must fulfill the needs of its four distribution centers. Minimum
requirement at each center is as follows.
Distribution center 1: 7 million liters
" " 2: 5 " "
" " 3: 3 " "
" " 4: 2 " "

Cost of shipping one million liters form each plant to each distribution center is
given in the following table in hundreds of dollar.
Distribution Center

D1 D2 D3 D4
P1 2 3 11 7
Plant
P2 1 0 6 1
P3 5 8 15 9

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 Find the initial basic feasible solution by:
a. North-west corners method
b. LCM
c. VAM if the object is to minimize the total transportation cost
Answer:
a. Total cost = $11, 600
b. Total cost= $11,200
c.
D1 D2 D3 D4 Supply Row Penalty
P1 2 3 11 7 6 1 1 5 -
P2 1 0 6 1 1 1 - - -
P3 5 8 15 9 10 3 3 4 4
Demand 7 5 3 2

Column Penalty
7 5 3 2
1 3 5 6
3 5 4 2
3 - 4 2
5 - 15 9

m+n -1 +3+4-1 =6 ==>the solution is non-degenerate.

The total transportation cost=$(1x2+5x3+1x1+6x5+3x15+1x9) x100 = $ 10,200

Assignment
1. Determine an initial basic feasible solution to the following transportation problem by
VAM
Destination
D1 D2 D3 D4 Supply

S1 21 16 15 3 11
S2 17 18 14 13 13

16
 Source S3 32 27 18 41 19
Demand 6 10 12 15

2. Determine an initial feasible solution to the following transportation problem using

a. NWCM
b. LCM, &
c. VAM
Destination
D1 D2 D3 D4 Supply

A 11 13 17 14 250
Source B 16 18 14 10 300
C 21 24 13 10 400
Demand 200 225 275 250

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5.3. OPTIMALITY TESTS
Once an initial solution is available, the next step is to check its optimality. An optimal
solution is one in which there is no opportunity cost. That is, there is no other set of
transportation routes (allocations) that will reduce the total opportunity cost. Thus we
have to evaluate each unoccupied cell (represents unused route) in the transportation
table in terms of opportunity cost.

The purpose of the optimality test is to see if the proposed solution just generated can be
improved or not. The solution to be checked for optimality must be non-degenerate i.e
the no of occupied cells must be m+n-1.

The Procedure for testing optimality is analogous to that of the simplex method. A
distinction is made between basic variables, those associated with occupied cells & non-
basic variables, those associated with the empty cells.
For each empty cell, the effect of changing it to an occupied cell is examined. If any of
these changes are favorable, the solution is not optimal & a new solution must be
designed. A favorable change means an increase in the value of the objective function in
maximization problems or a decrease in minimization problems.

Optimum solution to a TP can be obtained by following two methods. These methods

are much simpler compared to simplex method of an LPP.
A. Stepping stone Method
B. Modified Distribution method (MODI Method)

A. Stepping-stone method
The Stepping-stone method is an iterative technique for moving from an initial feasible
solution to an optimal solution in transportation problems.

For the stopping- stone method to be applied to a transportation problem, one rule
about the no of shipping routes being used must be observed. The rule is:

“The No of occupied routes (or squares) must always be equal to one less than the sum
of the no of rows plus the no of columns."
i.e Occupied shipping routes ( squares) = No of rows + No of columns - Non degenerate
solution.

Rules for drawing each closed loop:

1. Select an unused square (cell) to be evaluates.

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2.Beginning at this cell, trace a closed loop going clockwise draw an arrow to an
occupied cell in the same row ( or column).

3. Move vertically or horizontally (but never diagonally) to another occupied cell

“stepping –over” unoccupied or occupied cells (if necessary) without changing them. Follow
the same procedure to other occupied cells until returning to the original empty cell.

4. Begin with a plus (+) sign at the unused cell, place alternative (-) signs and plus signs on each
corner square of the closed path just traced.
i.e At each turn of the loop ( the loop may cross over itself at times), plus and minus signs
are alternately placed in the cells, starting with a + sign in an empty cell.

5. There must be exactly one cell with a + sign and exactly one cell with a - sign in any row
or column in which the loop turns.

6. An even no of at least four cells must participate in a loop and the occupied cells can be
visited once and only once.
7. Repeat steps 1 to 4 until an improvement index has been calculated for all unused squares
(cells). If all indices computed are greater than or equal to zero, an optimal solution has been
reached. If not, it is possible to improve the current solution and decrease total shipping costs.

Note:
In a non-degenerate problem, there is only one possible way of drawing the loop for
each empty cell.

How to find the value of a cell evaluator

The value of a cell evaluator is the sum of the per unit shipping costs in the gaining cells
less the sum of the per unit shipping costs in the losing cells of the closed loop. This
evaluation process must be extended to all unoccupied cells.

1. The test of optimality for a minimization (cost) problem:

If one or more of the cell evaluators is negative, the existing solution is not optimal.
i.e: For minimization (cost) problems, all the cell evaluators must be positive for
optimality.

 Analysis of test:
Check all the empty cells and select for improvement the one with the
largest improvement potential.

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  If the solution is not optimal, the next step in the transportation method is to
find a better solution. The operations in this step are:
a. Identify the “incoming" cell (the empty cell to be occupied)
In a minimization case, the incoming cell is located by identifying
the most negative cell evaluator.
b. Design an improved solution
-By shifting units form cell to cell

2. The test of optimality for a maximization (profit) case:

: Is the reversed of minimization case
-If one or more of the cell evaluators is positive, the existing solution is not
optimal.
i.e: for a maximization (profit) case, all the cell evaluators must be negative for
optimality. If any cell evaluation is positive, the solution is not optimal.

Note:
 A cell evaluator of 0 indicates the existence of another solution just as good as the
current solution. Thus, in the final solution, if cell evaluators of 0 exist, this
indicates the existence of multiple optimal solutions.
 If two or more cells have the same value, then either may be selected.
 If two or more of the "losing" cells contain the same no of units, both will become
empty simultaneously and a “degenerate" solution will result.
 For the minimization case; when one or more cell evaluators are negatives, the
cell with the largest negative should be brought into solution because that route
has the largest potential for improvement per unit.
 The loop starts and ends at the selected unoccupied cell. Every corner element of
the loop must be an occupied cell.

Example:
1. Use NWCM to find initial feasible solution and test the solution for optimality.
Project Project Project ss
A B C
F1 4 2 8 100
Farm

F2 5 1 9 200
F3 7 6 3 200
dd 50 150 300 500

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 Solution
Initial feasible solution

Project Project Project ss

A B C
F1 4 2 8 100
50 50
F2 5 1 9 200
100 100
F3 7 6 3 200
200
dd 50 150 300 500

m=3, n=3==> 3+3-1=5(Non-degenerate solution)

Total transportation cost = $[50x4+50x2+100x1+100x9+200x3] = $1900

Evaluation path for the unoccupied cells

Project Project Project ss

A B C
F1 4 2 8 100
50 50 - +

F2 5 1 9 200
100 + 100-
F3 7 6 3 200
200
Dd 50 150 300 500
Table: Test of optimality
Unoccupied cells Cell evaluators
(F2 ,A) +5-4+2-1=+2
(F1 ,C) +8-9+1-2=-2
(F3 ,A) +7-4+2-1+9-3=+10
(F3 ,B) +6-1+9-3=+11

The negative value for cell (F1, C) indicates an improved solution is possible. For each
unit we can shift into that cell, the total cost will decrease by $2. The next question is
how many units can be reallocated into that cell while retaining the balance of supply
and demand for that table?

The Stepping- stone path for cell (F1, C) is:

21
The + Signs in the path indicate units to be added, the - signs indicate units to be
subtracted. The limit on subtraction is the smallest quantity in a negative position along
the cell path. There are two quantities in negative positions, 50 and 100. Because 50 is
the smaller quantity, that amount will be shifted in the following manner: Subtract 50
units from each cell on the path with a - sign and add 50 units to the quantity of each cell
with a + sign in it.
With each iteration (new solution), it is necessary to evaluate the empty cells to see if
further improvements is possible.

The distribution plan after reallocation of 50 units is:

A B C ss
F1 4 2 8 100
50 50
F2 5 1 9 200
150 50
F3 7 6 3 200
200
dd 50 150 300 500

Table: Test of optimality

Unoccupied cells Cell evaluators
(F1 ,B) +2 -8+9-1 =+2

(F2 ,A) +5 -4+8-9 =0

(F3 ,A) +7-4+8-3 =+8

(F3 ,A) +6-1+9-3= +11

Because none of these no is negative, this is an optimal solution. Therefore, the total cost
for the distribution plan is:
The total transportation cost = $ (50x4 +50x8 150x1+50x9 +200x3) = $1,800

2. Consider the following TP

Destination
R S T ss
A 1 2 3 100
Origin

B 4 1 5 110
210
dd 80 120 60
260

22
a. Obtain the basic feasible solution using VAM
b. Obtain the optimal solution
c. What is the optimal shipping cost?
Solution:
a. Initial feasible solution
To
R S T ss
Opportunity cost
1 2 3 100
A 1 1 1 1
80 10 10
From

B 4 1 5 110 3 3 - -
110
Dummy 0 0 0 50 0 - - -

dd 80 120 60 260
Opportunity 1 1 3
3 1 2
cost 1 2 3
1 2 -

Note: Include the dummy cells to select the opportunity cost under VAM problems.

b. Test of optimality.

Table: Test of optimality

Unoccupied cells Cell evaluators

+4-1+2-1= +4
(B,R)
+5-1+2-3= +3
(B,T)
+0-1+3-0= +2
(D,R)
+0-2+3-0= +1
(D,S)

Since none of the cell evaluators is negative, the above feasible solution is optimal.
Thus, accordingly the distribution is as follows
A Supplies 80 units to warehouse R
B Supplies 10 units to warehouse S
C Supplies 10 units to warehouse T
B Supplies 110 units to warehouse S

23
c. The total optimal shipping cost is = $240

Exercise:
Consider the following transportation problem

Store Store Store

Supply
1 2 3

A 12 20 15 50
warehouses

B 9 11 4 15
C 20 14 8 55

Demand 25 50 45 120

a. Develop an initial feasible solution using the NWCM. And compute the total cost
for this solution.
b. Evaluate the solution using the stepping-stone method. Is the solution optimal?
Explain.
c. What is the total cost for the optimal solution?

B. Modified Distribution Method (MODI Method)

It is another logarithm for finding the optimal solution to a transportation problem.

The MODI method allows us to compute improvement indices quickly foe each unused
cell with out drawing all of the closed paths. Because of this, it can often provide
considerable time savings over the stepping-stone method for solving transportation
problems.
[

MODI provides a new means of finding the unused route with the largest negative
improvement index. Once the largest index is identified, we are required to trace only
one closed path. Just as with the stepping-stone approach, this path helps to determine
the maximum No of units that can be shipped via the best unused route.

Steps in the MODI Method

The steps to evaluate unoccupied calls are as follows:
1. For an initial basic feasible solution, calculate Ui and Vj ;for rows and
columns and set

Cij = Ui + Vj for all occupied calls (i , j)

i.e: Cell cost= Raw Index +Column Index

24
 2. For unoccupied cells, calculate opportunity cost by using the relation:

Kij = Cij– (Ui + Vj); for all j and j.

Where Kij is the cell evaluator or opportunity cost

3. Examine the sign of each Kij

For minimization case:
i. If Kij > 0, then current basic feasible solution is optimal.
ii. If Kij = 0, then the current basic feasible solution will remain be
unaffected but an alternative solution exists.
iii. If one or more Kij < 0, then an improved solution be obtained entering
unoccupied cell (i, j), in the basis. An unoccupied cell having the largest
negative value of Kij is chosen for entering into the solution mix (new
transportation schedule)
4. Solve the problem as you did using the stepping-stone method.
i.e. construct a closed path (or loop) for the unoccupied cell with largest
negative opportunity cost. Start the close path with the selected unoccupied
cell and mark a plus sign (+) and in this cell, trace a path along the rows (or
columns) to an occupied cell, mark the corner with minus sign (-) and
continue down the column (or row) to an occupied cell and mark the corner
with plus sign (+) and minus sign (-) alternatively. Close the path back to the
selected unoccupied call.
Locate the smallest quantity allocated to a cell marked with a minus sign.
Allocate this value to the selected unoccupied cell and add it to other
occupied cells marked with plus signs and subtract it from the occupied cells
marked with minus signs.

5. Obtain a new improved solution by allocating units to the unoccupied call

and calculate the new transportation cost.

6. Test the revised solution for optimality.

Note:
Any initial feasible solution will do: NWCM, VAM Solution, or any arbitrary
assignment.
The stepping- stone method is efficient for small sized transportation problems. For
larger problems, however, the MODI method is recommended.

25
Example:
1. Obtain an optimal solution to the transportation problem by MODI method given
below:

Project Project Project

Supply
No 1 No 2 No 3

Farm 1 4 2 8 100
Farm 2 5 1 9 200
Farm 3 7 6 3 200

Demand 50 150 300 500

Solution
Note:
Both the MODI and the stepping - stone method will yields the same values.
Remark:
Conventionally, we begin by assigning a value of zero as the index for row 1 (U1=0).
Once row index has been established, it will enable us to compute column index
numbers for all occupied cells in that row. Similarly, once a column index number has
been determined, index numbers for all rows corresponding to occupied cells in that
column can be determined.

Consider the initial feasible solution of the given example by NWCM as shown below:

Initial solution, NWCM

Project Project Project

Supply Ui
No 1 No 2 No 3

Farm 1
4 2 8 100 U1=0
50

Farm 2
5 1 9 200 U2=1
100 100

Farm 3
7 6 3 200 U3=-7
200

Demand 50 150 300 500

Vj V1=4 V2=2 V3=10

To determine Cij , use the occupied cells.

For instance, C11=4, C12=2, C22=1, C23=9, and C33=3

26
 Cij= Ui + Vj
==>C11= U1 +V1==>4=0+ V1==> V1=4 , U1=0 by convention
==>C12= U1 +V2==>2=0 +V2==> V1=2
==>C22= U2 +V2==>1= U2+ 0==> U2=-1
==>C23= U2 +V3==>9= -1+V3==> V3=10
==>C33= U3 +V3==>3= U3+10 ==> U3= -7

Note:
Cij≠ Ui + Vj (For unoccupied cells)
For instance, from the above information, C32 ≠ U3 + V2==>6≠-7+2

Table: Test of optimality

Unoccupied cells Cell evaluators

Kij = Cij– (Ui + Vj)
(1,3) C13 – (U1 +V3)=8-(0+10)= -2
(2,1) C21 – (U2 +V1)=5-(-1+4)=+2
(3,1) C31– (U3 +V1)=7-(-7+4)=10
(3,2) C32– (U3 +V2)=6-(-7+2)=+11

In this case, we found hat cell (1, 3) had an evaluation of -2, which represented an
improvement potential of and $ 2 per unit. Hence, an improved solution is possible.

The stepping-stone path for call (1, 3) is:

Project Project Project

Supply
No 1 No 2 No 3
4 2 8 100
Farm 1
50 50
5 1 9 200
Farm 2
100 100

Farm 3
7 6 3 200
200

Demand 50 150 300 500

27
The distribution plan after reallocation of 50 units is:

Project Project Project

Supply Ui
No 1 No 2 No 3

Farm 1
4 2 8 100 U1=0
50 50
5 1 9 200
Farm 2 U2=1
-+ 100 +
100 -

Farm 3
7 6 3 200 U3=-5
200

Demand 50 150 300 500

Vj V1=4 V2=0 V3=8

Cij= Ui + Vj
==>C11= U1 +V1==>4=0+ V1==> V1=4 , U1=0 by convention
==>C13= U1 +V3==>8=0 +V3==> V3=8
==>C23= U2 +V3==>1= U2+ 0==> U2=1
==>C22= U2 +V2==>1= 1+V2==> V2= 0
==>C33= U3 +V3==>3= U3+8 ==> U3= -5

Table: Test of optimality

Unoccupied cells Cell evaluators

Kij = Cij– (Ui + Vj)
(1,2) C12– (U1 +V2)=2-(0+0)= 2
(2,1) C21 – (U2 +V1)=5-(1+4)=0
(3,1) C31– (U3 +V1)=7-(-5+4)=8
(3,2) C32– (U3 +V2)=6-(-5+0)=+11

Because none of the cell evaluators is negative, this is an optimal solution.

Thus, the total cost for the distribution plan =$1800

28
Assignment
1. Obtain an optimal solution to the transportation problem by MODI method given
below.

D1 D2 D3 D3 Supply

Farm 1
19 30 50 10 7

Farm 2
70 30 40 60 9

Farm 3
40 8 70 20 18

5 8 7 34
Demand 14

2. A company has four ware houses a, b, c and d. It is required to deliver a product from
these warehouses to three customers A, B and C. The warehouses have the following
amounts in stock:

Ware house: a b c d
No of units: 15 16 12 13

And the customer’s requirements are:

Customer: A B C
No of units: 18 20 18

The table below shows the costs of transporting one unit from warehouse to
customer.

A b c d

8 9 6 3
A

6 11 5 10
B

3 8 7 9
C

Find the optimal transportation routes.

29
3. A manufacturer has distribution centers at X, Y and Z. These centers have availability
40, 20, and 40 units of his product. His retail outlets at A, B, C, D and E require
25,10,20,30 and 15 units respectively. The transportation cost (in $) per unit between
each centre outlet is given below:

Distribution
Retail outlets
center

A B C D E
X
55 30 40 50 40

35 30 100 45 60
Y

40 60 95 35 30
Z

Determine the optimal distribution to minimize the cost of transportation.

4. A company has factories A, B and C which warehouses t D, E, F and G. Monthly

factory capacities are 160,150 and 190 units respectively. Monthly warehouses
requirements are 80, 90,110 & 160 units respectively. Unit shipping costs (in $) are as
follows:
To
D E F G

A 42 48 38 37
From

40 49 52 51
B

39 38 40 43
C

Determine the optima distribution for this company to minimize shipping costs.

5.4. SPECIAL CASES

5.4.1. Degeneracy
A condition that occurs when the No of occupied cells in any solutions less than the No
of rows plus the No of columns minus 1 in a transportation table.

i.e. No of occupied calls < m+ n -1 .....................Degeneracy

If the No of occupied cells = m+n-1, then the solution is non- degenerate.

30
The degeneracy in the transportation problems may occur at two stages:
1. when obtaining an initial solution
2. During improvement (or at any stage while moving to wards optimal
solution.
To resolve degeneracy, we processed by allocating a very small quantity close to zero to
one or more unoccupied cell so as to get m+n-1 number of occupied cells. This amount is
denoted by a Greek letter  (epsilon) or  (delta). This quantity would not affect the
total cost as well as supply and demand values.
 = Almost zero
In a minimization transportation problem, allocate the smallest transportation cost to.

In a maximization transportation problem, it should be allocated to a cell that has a high

pay off value.

Insert  when it is able to create a closed loop for each occupied cell.

The purpose of epsilon/delta is to enable evaluation of the remaining empty cells. The
choice of location for the epsilon/delta can be some what tricky: some empty cells may
be unsuitable if they do not enable evaluations of remaining empty cells. Not all choices
would be acceptable.
Actually, the No of epsilon/deltas needed will equal the difference between the No of
completed cells and m+n-1.Howerver; you will only be exposed to the most common
case in which one more completed cell is needed.

The epsilon/delta cannot be placed in a cell which later turns out to be in a negative
position of a cell path involved in reallocation because epsilon/delta will be the
“smallest quantity a negative position “ and shifting that minute quantity around the
cell path will leave the solution virtually unchanged. Consequently, a certain amount of
trial and error may be necessary before a satisfactory location can be identified for
epsilon/delta.

Example
1. Solve the following transportation problem.

1 2 Supply
1 3 3
50
2 4 6 30
Demand 50 30 80

31
 Solution:
Using NWCM and MODI, the initial solution is:

Ui
1 2 Supply

3 3
1 50 U1=0
50 
4 6
2 30 U2=3
30
Demand 50 30 80
Vj V1=3 V2=3

Cij= Ui + Vj
==>C11= U1 +V1==>3=0+ V1==> V1=3, U1=0 by convention
==>C12= U1 +V2==>3=0 +V2==> V2=3
==>C22= U2 +V2==>6= U2+3==> U2= 3
==>C33= U3 +V3==>3= U3+8 ==> U3= -5
Note: m=2 and n=2==>2+2-1=3==>Occupied cells=2< 3 (Degeneracy)
Table: Test of optimality

Unoccupied cell Cell evaluator

Kij = Cij– (Ui + Vj)
(2,1) C21 – (U2 +V1)=4-(3+3) =-2

The optimal solution is:

Ui
1 2 Supply
Cij= Ui + Vj
3 3
==>C11=U1+V1==>3=0+V1==>V1=3, U1=0 by
1 50 30 50 U1=0
convention
4 6
2 30 U2=1 ==>C21= U2+V1==>4= U2+3==> U2=3
30
==>C12= U1 +V2==>3= 0+ V2==> V2= 3
Demand 50 30 80

Vj V1=3 V2=3

Table: Test of optimality

Unoccupied cells Cell evaluators

Kij = Cij– (Ui + Vj)
(2,2) C22– (U2 +V2)=6-(1+3)= +2

The total cost= $(20x3+30x3+30x40=$270

32
3.5. ASSIGNMENT PROBLEMS
The Assignment Problem(AP) refers to the class of LPPs that involves determining the
most efficient assignment of people to projects, salespeople to territories, contracts to
bidders ,jobs to machines, and so on. The objective is to assign a number of resources to
an equal number of activities so as to minimize total costs or total time or maximize total
profit of allocation.

The problem of assignment arises because available resources such as men, machines,
etc have varying degrees of efficiency for performing different activities such as job.
Therefore, cost, profit or time of performing the different activities is different.
Assumptions:
The AP is a special case of TP under the condition that the number of origins is equal to
the number of destinations. Viz. m=n .Hence assignment is made on the basis of 1:1.

Following are the assumptions:

 Number of jobs is equal to the number of machines or persons
 Each man or machine is loaded with one and only one job.
 Each man or machine is independently capable of handling any of the job being presented.
 Loading criteria must be clearly specified such as “minimizing operating time” or
“maximizing profit” ,or “minimizing production cost” or “minimizing throughout
(production cycle) time ” etc.

Remark:
 The AP is considered as a special TP in which the supply at each source and the demand at each
destination are always one unit.
 Since the supply and demand are always equal to one unit in each row and column, there is no
need to write them in the assignment table.

33
Example:
Service costs of different team assignment ($ in thousands)

Table: The assignment table

Zone
Service Z1 Z2 Z3 Zone
Team Service Z1 Z2 Z3 Supply
S1 20 15 31 ====> Team
S1 20 15 31 1
S2 17 16 33
S2 17 16 33 1
S3 18 19 27
S3 18 19 27 1
Demand 1 1 1

The above problem can be presented as a LPP as follows:

MinZ = 20x11 +15x12 + 31x13 +17x21 +16x22 +33x23 +18x31+19x32 +27x33
Subject to the constraints
a. Supply constraints:
x11 +x12 +x13 =1 S1 constraint
x21 + x22 + x23 =1 S2 constraint
x31 +x32 +x33 = 1 S3 supply constraint
b. Demand constraints
x11 + x21 + x31 = 1 Z1 constraint
x12 + x22 + x32 = 1 Z2 constraint
x13 + x23 +x33 = 1 Z3 constraint
xij either 0 or 1 for all i , j
Since all xij can be either 0 or 1, there will be one assignment in each supply constraint
and one assignment in each demand constraint.

As in the transportation problem, assignment problems can be balanced or not. In a

balanced case, the number of objects to be assigned equals the number of objects to
which they are assigned. Unbalanced problem can be balanced by adding a dummy
(dummies) with zero cost coefficients.

5.5.1. Methods of solving assignment problems

An assignment problem can be solved by the following methods:
1. Enumeration method
2. Simplex method
3. Transportation method
4. Hungarian method

34
5.5.1.1. Hungarian Method/Food’s Technique/
The Hungarian Method (developed by Hungarian mathematician D.Konig) of
assignment provides us with efficient method of finding the optimal solution without
having to make a direct comparison of every solution. It works on the principle of
reducing the given cost matrix (the principle of matrix reduction) to a matrix of
opportunity costs, which means that by subtracting and adding appropriate numbers in
the cost table or matrix ,we can reduce the problem to a matrix of opportunity costs.

Opportunity costs show the relative penalties associated with assigning resource to an
activity as opposed to making the best or least-cost assignment. If we can reduce the cost
matrix to the extent of having at least one zero in each row and column, then it will be
possible to make optimal assignments.

Steps in solving assignment problems:

Step.1. Develop the cost table from the given problem
If the number of rows does not equal the number of columns and vice versa, then a
dummy row or dummy column must be added. The assignment costs for dummy cells
are always zero.

Step 2.Find the opportunity cost table

i.e. The transformation of the cost matrix to what is termed as a total-opportunity
cost matrix.
It involves two operations:
a. Perform row operation
i.e. Locate the smallest element in each row of the given cost table and
then subtract that the given cost table and then subtract that from each
element of that row
b. Perform column operation
i.e. In the reduced matrix obtained from 2(a) ,locate the smallest element
in each column and then subtract that from each element of that column.
Notice that each row and column now have at least one zero value.
Step 3.Test for an optimal assignment
i.e. Test the table resulting from step 2 to see whether an optimal assignment can be
made. The procedure is:

35
 a. Draw the minimum number of Horizontal and /or Vertical lines necessary to cover all
zeros costs.
Draw the lines by trial and error but always try to cover two or more
zeros with one line.
b. Count the number of the lines
If the number of lines equals either the number of rows or columns in the
table, an optimal assignment can be made. If the number of lines is less
than the number of rows or columns, an improvement is possible (we
proceed to step 4).

Step 4.Improve the present opportunity cost table (matrix)

This is done by the following operations:
a. Find the smallest entry in the uncovered cells (cells with no lines through them) and subtract it
from all entries in the uncovered cells.
b. Add the same smallest entry to those cells in which the lines intersect (cells with two lines
them)
c. Cells with one line through them are transferred (i.e. unchanged to the improved table).

In those problems where the first improvement does not yield an optimal solution, we
keep on improving the solution by repeating step 4 until an optimal solution is achieved.

Step 5: Make an optimal assignment

An optimal assignment should be made to cells with a zero entery, maintaining the one-
to-one requirement

If more than one optimal solution exists, a trial-and –error approach can be used to find
all possible combination assignments in the zero cells.

Note that multiple optimal solutions are possible.

Example:
1. A computer center has three programmers. The center wants three application
programs to be developed. The head of the computer center, after studying carefully the
programs to be developed, estimate the computer time in minutes required by the
experts for the application programs as follows:

36
 Programs
(Estimated time in minute)

Programmers
A B C
1 120 100 80
2 80 90 110
3 110 140 120

Assign the programmers to the programs in such a way that the total computer time is
minimum.

Solution:
Steps 1 and 2:
a. Perform row reduction
The minimum time element in row 1, 2, and 3 is 80, 80 and 110 respectively. Subtract
those elements from all elements in there respective row. The reduced time matrix is:
Table: After row reduction

A B C
-80 1 40 20 0
-80 2 0 10 30
-110 3 0 30 10

b. Column reduction
Since column B has no one ‘0’, perform also column reduction. The minimum time
element in columns A, B and C is 0, 10 and 0 respectively. Subtract these elements from
all elements in their respective column to get the reduced time matrix.
Table: After column reduction

A B C
1 40 10 0
2 0 0 30
3 0 20 10

Step 3: Test for an optimal assignment

a. Draw the minimum number of horizontal and /or vertical lines necessary to cover all
zero times (costs).
Table: Test of optimal assignment

A B C
1 40 10 0
2 0 0 30
3 0 20 10

37
b. Count the number of lines
If the number of lines is equal to the number of rows/columns, the optimal solution is
obtained. Thus proceed directly to step 5.

Step 5.Make an optimal assignment

An optimal assignment should be made to cells with a zero entery, maintaining the one-
to-one requirement.
Table: optimal assignment

A B C
1 40 10
2 3 30
3 1 00 010
00
Note:
In optimal assignment, start with row/column having one zero and cancel the
alternative zeros(x)

The pattern of assignment among programmers and programs with their respective time
(in minute) is given below:

Programmer Program Time (in minutes)

1 C 80
2 B 90
3 A 110
Total time=280 minutes

2. A department has five employees with five jobs to be performed .The time (in hours)
each man will take to perform each job is given in the effectiveness matrix

Employees

I II III IV V
A 10 5 13 15 16
B 3 9 18 13 6
10 7 2 2 2
Jobs

D 7 11 9 7 12

7 9 10 4 12
E

38
How should the jobs be allocated, one per employees, so as to minimize the total man-
hours?

Solution:
Table: After row reduction

I II III IV V
-5 A 5 0 8 10 11
-3 B 0 6 15 10 3
-2 C 8 5 0 0 0

-7 D 0 5 2 0 5

3 5 6 0 8
-4 E

Since the number of lines less than the number of rows/columns, an improvement is
possible.
Step 4. Improve the present opportunity cost table
This is done by the following operations;
a. Select the smallest entry (element) among all uncovered elements by the lines and
subtract it from all entries in the uncovered cells.
b. Add the same smallest entry to those cells in which lines intersect (cells with two
lines them).
c. Cells with one line through them are unchanged to the improved table.

Table: After improvement

I II III IV V
A 7 0 8 12 11
B 0 4 13 10 1
C 10 5 0 2 0

D 0 2 0 0 2

3 3 4 0 6
E

39
Since the number of lines equals to the number of rows/columns, the solution is optimal.
Table: Optimal assignments

I II III IV V

A 7 8 12 11

B 4 13 10 1
0
C 10 5 2

D 0 2 2
0

E 3 3 4 6

0 0

The pattern of assignments among jobs and employees with respective time (in hours) is
given below:
0 0
Job Employees Time (in minutes)
A II 5
B I 3
C V 0 2
D III 9

E IV 4

Total time=23 Hours

40