Course Code and Title:ACED 4 - Management Science

Lesson Number: 5
Topic:Special –Purpose Algorithm: Transportation Method

Introduction
This module explains another type of linear programming problem, which is the
transportation problem. This can be modeled as network flow problem, with the use of
nodes (points) and arcs (lines).
This module will not be using a standard linear programming software, instead the
transportation problems will be solved using the special-purpose algorithms.

Objectives

At the end of this lesson, you should be able to:

1. .Describe transportation problem of linear programming.
2. Develop an initial solution to a transportation model with the northwest-corner and
intuitive least-cost method.
3. Show patience and critical thinking when solving transportation problems using the
Stepping Stone method.

Pre-Assessment

Select the best answer:

1. If the total demand equals the total supply in a transportation problem, the problem
is
a. degenerate.
b. balanced.
c. unbalanced.
d. infeasible.
2. If a transportation problem has 4 sources and 5 destinations, the linear program for
this will have
a. 4 variables and 5 constraints.
b. 5 variable and 4 constraints.
c. 9 variables and 20 constraints.
d. 20 variables and 9 constraints.
3. In a transportation problem, what indicates that the minimum cost solution has been
found?
a. all improvement indices are negative or zero
b. all improvement indices are positive or zero
c. all improvement indices are equal to zero
d. all cells in the dummy row are empty
4. An assignment problem may be viewed as a transportation problem with
a. a cost of $1 for all shipping routes.
b. all supplies and demands equal to 1.
c. only demand constraints.
d. only supply constraints.
5. If the number of filled cells in a transportation table does not equal the number of
rows plus the number of columns minus 1, then the problem is said to be
a. unbalanced.
b. degenerate.
c. optimal.
d. maximization problem.
Presentation of the Lesson

The transportation problem is a specific case of linear programming concerned with

scheduling shipments from sources to destinations so that total transportation costs are
minimized.
The transportation model is concerned with selecting the routes between supply and
demand points in order to minimize costs of transportation subject to constraints of
supply at any supply point and demand at any demand point. 

Aims of Transportation Problem:

1. To deal with the distribution of goods from several points of supply (origins or
sources) to a number of points of demand (destinations). Usually we are given
a capacity (supply) of goods at each source, a requirement (demand) for goods
at each destination, and the shipping cost per unit from each source to each
destination.
2. To find out the optimum transportation schedule keeping in mind cost of
transportation to be minimized.
3. The origin of a transportation problem is the location from which shipments are
dispatched.
4. The destination of a transportation problem is the location to which shipments
are transported.
5. The unit transportation cost is the cost of transporting one unit of the
consignment from an origin to a destination.

Applications of Transportation Problem:

 1. It is used to compute transportation routes in such a way as to minimize
transportation cost for finding out locations of warehouses.
2. It is used to find out locations of transportation corporations depots where
insignificant total cost difference may not matter.
3. Minimize shipping cost from factories to warehouses ( or fro warehouses to retail
outlets).
4. Determine lowest cost location for new factory, warehouse, office, or other outlet
facility.
5. Find minimum cost production schedule that satisfies firms demand and
production limitations.

Types of Transportation Problem:

1. Balanced Transportation problem – occurs when the total supply is equal to
the total demand.
2. Unbalanced Transportation problem – occurs when the total supply is different
from the total demand

Special-Purpose Transportation Algorithm

The transportation algorithm is an iterative procedure in which a solution to a
transportation problem is found and evaluated using a special procedure to determine
whether the solution is optimal. If it is optimal, the process stops. If it is not optimal, a
new solution is generated. This new solution is at least as good as the previous one,
and it is usually better. This new solution is then evaluated, and if it is not optimal,
another solution is generated. The process continues until the optimal solution is found.

Steps in solving transportation problem:

1. Set up a balanced transportation table. If the table is not balance, add a dummy
source or dummy destination to balance it.
2. Develop an initial feasible solution.
An initial feasible solution is reached when all demand and supply constraints are
met. This can be done using any of the following methods:
 A. Northwest Corner Rule requires that we start in the upper-left-hand cell (or
northwest corner) of the table and allocate units to shipping routes as follows:
a. Exhaust the supply (factory capacity) at each row before moving down to
the next row.
b. Exhaust the (warehouse) requirements of each column before moving to
the right to the next column.
c. Check that all supply and demands are met.
B. Least Cost Method – is done by first starting at the cell with the lowest cost
C. Vogle Approximation Method
3. Determine the optimum basic solution using
1. Modified Distribution Method (MODI Method)
2. Stepping Stone Method - is an iterative technique for moving from an initial
feasible solution to an optimal feasible solution. This process has two distinct parts: The
first involves testing the current solution to determine if improvement is possible, and
the second part involves making changes to the current solution in order to obtain an
improved solution. This process continues until the optimal solution is reached.
For the stepping-stone method to be applied to a transportation problem, one rule about
the number of shipping routes being used must first be observed: The number of
occupied routes (or squares) must always be equal to one less than the sum of the
number of rows plus the number of columns.

Five Steps to Test Unused Squares with the Stepping-Stone Method

1. Select an unused square to be evaluated.
2. Beginning at this square, trace a closed path back to the original square via squares
that are currently being used and moving with only horizontal and vertical moves.
3. Beginning with a plus sign at the unused square, place alternate minus signs and
plus signs on each corner square of the closed path just traced.
4. Calculate an improvement index by adding together the unit cost figures found in
each square containing a plus sign and then subtracting the unit costs in each square
containing a minus sign.
5. Repeat steps 1 to 4 until an improvement index has been calculated for all unused
squares. 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.

Illustrative example 1. The Executive Furniture Corporation is faced with the

transportation problem shown in the figure below. The company would like to minimize
the transportation costs while meeting the demand at each destination and not
exceeding the supply at each source.

In formulating this as a linear program, there are three supply constraints (one for each
source) and three demand constraints (one for each destination). The decisions to be
made are the number of units to ship on each route, so there is one decision variable for
each arc (arrow) in the network. Let
Solution Using Special-Purpose Algorithm:

Step 1. Transportation Table 1

Step 2. Using the Northwest Corner Rule

Cost of this shipping:

Step 3. Improvement Indices Computation

DB = 4 – 4 + 8 – 5 = 3 4 – 5 +8 – 4 = 3
DC = 3 – 5 + 7 – 4 + 8 – 5 = 4

EC = 3 – 5 + 7 – 4 = 1

FA = 9 –8 + 4 – 7 = -2

DB = 4 – 4 + 8 – 5 = 3
Table 3

Improvement Indices Computation: DB: 4 – 4 + 3 – 5 + 9 -5 = 2

DC: 3 – 5 + 9 – 5 = 2
EA: 8 – 9 + 5 – 3 = 1
FB: 7 - 4 + 3 – 5 = 1

Decision: Ship 100 units from Des Moines Factory to Albuquerque Warehouse
200 units from Evansville Factory to Boston Warehouse
100 units from Evansville Factory to Cleveland Warehouse
200 units from Fort Lauderdale Factory to Albuquerque Warehouse
100 units from Fort Lauderdale Factory to Cleveland Warehouse
in order to reached a minimum cost of $3,900.

Example 2. Three suppliers A, B and C, each produce road grit which has to be
delivered to council depots W, X, Y and Z. The stock held at each supplier and the
demand from each depot is known. The cost, in pounds, of transporting one lorry load of
grit from each supplier to each depot is also known. This information is given in the
table. Determine the transportation schedule that will minimize the cost.
 Depot Depot Depot Depot Supply
W X Y Z
Supplier A 180 110 130 290 14
Supplier B 190 250 150 280 16
Supplier C 240 270 190 120 20
Demand 11 15 14 10 50

Solution: Initial Table using the least cost method

Depot Depot Depot Depot Supply
W X Y Z
180 110 130 290
Supplier A 14
x 14 x x

190 250 150 280

Supplier B 16
2 x
14 x

Supplier C 240 270 190 120

x
9 1 10 20
Demand 11 15 14 10 50

Initial Table using the Northwest corner rule

Depot Depot Depot Depot Supply
W X Y Z
Supplier A 180 110 130 290
14
11 3
Supplier B 190 250 150 280
16
12 4
240 270 190 120
Supplier C
10 10 20
Demand 11 15 14 10 50

Total Cost = 11(180) + 3(110) + 12(250) + 4(150) + 10(190) + 10(120) = 9,010

Improvement Indices: AY: 130 – 150 + 250 – 110 = 120
AZ: 290 – 120 + 190 – 150 + 250 – 110 = 350
BW: 190 – 180 + 110 – 250 = -130
BZ: 280 – 120 + 190 – 150 = 200
CW: 240 – 180 + 110 – 250 + 150 – 190 = -120
 Depot Depot Depot Depot Supply
W X Y Z
180 110 130 290
Supplier A 14
14
190 250 150 280
Supplier B 16
11 1 4
Supplier C 240 270 190 120
20
10 10
Demand 11 15 14 10 50
Improvement Indices: AW: 180 – 190 + 250 – 110 = 130
AY: 130 – 150 + 250 – 150 = 120
AZ: 290 – 120 + 190 – 150 + 250 -110 = 250
BZ: 280 – 120 + 190 – 150 = 200
CW: 240 – 190 + 150 – 190 = 10
CX: 270 – 250 + 150 – 190 = -20

Depot Depot Depot Depot Supply

W X Y Z
Supplier A 180 110 130 290
14
14
Supplier B 190 250 150 280
16
11 5
240 270 190 120
Supplier C 20
1 9 10
Demand 11 15 14 10 50

AW = 180 – 190 + 150 – 190 + 270 – 110 = 110

AY = 130 – 190 + 270 – 110 = 100
AZ = 290 – 120 +270 – 110 = 330
BX = 250 – 270 +190 – 150 = 20
BZ = 280 -120 + 190 – 150 = 200
CW = 240 -190 +150 – 190 = 10
Decision: Supplier Depot Unit Unit cost Cost
A X 14 x 110 1540
B W 11 x 190 2090
B Y 5 x 150 750
C X 1 x 270 270
C Y 9 x 190 1710
C Z 10 x 120 1200
Total Cost = 7560
Example 3. Three outlets A, B and C are supplied by three suppliers X, Y and Z. The table shows the
cost, in pounds, of transporting each unit, the number of units required at each outlet and the number of
units available at each supplier.
A B C Dummy Supply
X 9 11 10

40
Y 10 8 12

60
12 7 8
Z
50
Demand 50 40 30 120 150

a Explain why it is necessary to add a dummy demand point in order to solve this problem.
b Add a dummy demand point and appropriate costs to the table.
c Use the north-west corner method to obtain an initial solution.
Solution:
a) The total supply is 150, but the total demand is 120. A dummy is needed to absorb
this excess, so that total supply equals total demand.
b)
A B C Dummy Supply
X 9 11 10 0
40

Y 10 8 12 0
60

12 7 8 0
Z
50
Demand 50 40 30 30 150 150

c)
A B C Dummy Supply
9 11 10 0
X 40
40
10 8 12 0
Y 60
10 40 10
Z 12 7 8 0

20 30 50
Demand 50 40 30 30 120 150
Special Situations with Transportation Algorithm:
1. Unbalanced Transportation Problems.
These unbalanced problems can be handled easily by the preceding solution
procedures if we first introduce dummy sources or dummy destinations. In the event
that total supply is greater than total demand, a dummy destination (warehouse), with
demand exactly equal to the surplus, is created. If total demand is greater than total
supply, we introduce a dummy source (factory) with a supply equal to the excess of
demand over supply. In either case, shipping cost coefficients of zero are assigned to
each dummy location or route because no shipments will actually be made from a
dummy factory or to a dummy warehouse. Any units as signed to a dummy destination
represent excess capacity, and units assigned to a dummy source represent unmet
demand.
2. Degeneracy in Transportation Problems
Degeneracy occurs when the number of occupied squares or routes in a transportation
table solution is less than the number of rows plus the number of columns minus 1. To
handle degenerate problems, we create an artificially occupied cell—that is, we place a
zero (representing a fake shipment) in one of the unused squares and then treat that
square as if it were occupied. The square chosen must be in such a position as to
allow all stepping-stone paths to be closed, although there is usually a good deal of
flexibility in selecting the unused square that will receive the zero.
3. More than One Optimal Solution
Such a situation is indicated when one or more of the improvement indices that we
calculate for each unused square is zero in the optimal solution. This means that it is
possible to design alternative shipping routes with the same total shipping cost. The
alternate optimal solution can be found by shipping the most to this unused square
using a stepping-stone path. Practically speaking, multiple optimal solutions provide
management with greater flexibility in selecting and using resources.

Generalization
Let us now summarize our lesson today by answering the following guide questions:
1. What is linear programming by transportation method?
2. What are the steps in solving transportation problems?

References

Render, Barry, Stair, Ralph Jr. and Hanna, Michael, Quantitative Analysis for
Management: Global Edition,11th Edition Pearson Education Inc, 2012

Hillier, Frederick and Lieberman, Gerald. Introduction to Operations Research. 7 th

edition, McGraw-Hill Co. Inc.2001

Wayne, Winston. Operations Research: Applications and Algorithms. 4 th edition, 2003