TRANSPORTATION

PROBLEM
THE TRANSPORTATION
PROBLEM
To find the most economical way of allocating 𝑚𝑚 sources to 𝑛𝑛
destinations, given:
• Capacity of each source;
• Demand of each destination;
• Transportation cost to ship one unit from a source to a destination.
Input to transportation problem:

 Set of supply nodes

 Set of demand nodes
 Per unit Transportation cost to meet demand
in each node from permissible supply nodes
 Minimum demand required at each demand
node
 Maximum possible supply from each supply
node
Objective of transportation problem:
To minimize the transportation cost/time

Output of transportation problem:

 Quantity supplied from a particular supply to
a particular destination
 Number of units produced in particular time
periods
Capacity of each source

Demand of each
destination

Transportation cost to ship one unit

from a source to a destination
A company has 4 production plants and 3 warehouses. After production, finished goods
are transferred to warehouses to meet distributors’ demand. Estimated production at
each of the plants, planned allocation to each of the warehouses (in units of truckloads),
and shipping costs for the upcoming month are given below.

Destination A Destination B Destination C Production

Source 1 $8/unit $9/unit $4/unit 72 units
Source 2 $5/unit $6/unit $8/unit 38 units
Source 3 $7/unit $9/unit $6/unit 46 units
Source 4 $5/unit $3/unit $7/unit 19 units
Demand 110 units 34 units 31 units

Since the cost of shipping is significant, the company wants to minimize the
transportation cost. Given the data, determine the optimal shipping plan to
minimize the total shipping cost.

A TYPICAL TRANSPORTATION
PROBLEM
 Destination A Destination B Destination C Production
Source 1 $8/unit $9/unit $4/unit 72 units
Source 2 $5/unit $6/unit $8/unit 38 units
Source 3 $7/unit $9/unit $6/unit 46 units
Source 4 $5/unit $3/unit $7/unit 19 units
Demand 110 units 34 units 31 units 175 Total demand
Total production = EQUAL

Balanced transportation problem:

Total supply = total demand

Unbalanced transportation problem:

• Total supply ≠ total demand
• Solve the problem same way as for the balanced transportation problem
• Dummy source / dummy destination is used for solving (discussed later)

BALANCED / UNBALANCED
TRANSPORTATION PROBLEM
 Prototype Example
One of the main products of the P & T COMPANY is canned peas. The
peas are prepared at three canneries (near Bellingham, Washington;
Eugene, Oregon; and Albert Lea, Minnesota) and then shipped by truck
to four distributing warehouses in the western United States
(Sacramento, California; Salt Lake City, Utah; Rapid City, South Dakota;
and Albuquerque, New Mexico). Because the shipping costs are a major
expense, management is initiating a study to reduce them as much as
possible. For the upcoming season, an estimate has been made of the
output from each cannery, and each warehouse has been allocated a
certain amount from the total supply of peas. This information (in units
of truckloads), along with the shipping cost per truckload for each
cannery-warehouse combination, is given in Table. Thus, there are a total
of 300 truckloads to be shipped. The problem now is to determine which
plan for assigning these shipments to the various cannery-warehouse
combinations would minimize the total shipping cost.
• 3 plants
• 4 warehouses
• Objective is to determine a minimum cost shipping plan that meets the production
and allocation requirements

Shipping cost ($)/ truckload

Warehouses
W1 W2 W3 W4 Production
Plant 1 464 513 654 867 75
Plant 2 352 416 690 791 125
Plant 3 995 682 388 685 100
Allocation 80 65 70 85 300
 W1 - 80

75 P1

W2 - 65

125 P2

W3 - 70

100 P3

W4 - 85
Formulate the problem as a linear program.

VISUAL REPRESENTATION
• Decision variables
𝒙𝒙𝒊𝒊𝒊𝒊 : Number number of truckloads to be shipped from cannery 𝒊𝒊 to warehouse 𝒋𝒋

• Constraints
• Production constraint at each plant
• Allocation constraint at each warehouse
• Non-negativity constraints for the number of truckloads to be shipped

• Objective function
To minimize the total shipping cost (𝒁𝒁)

FORMULATION
 LINEAR PROGRAMMING FORMULATION
Minimize 𝑍𝑍 = 464𝑥𝑥11 + 513𝑥𝑥12 + 654𝑥𝑥13 + 867𝑥𝑥14 + 352𝑥𝑥21 + 416𝑥𝑥22 +
690𝑥𝑥23 + 791𝑥𝑥24 + 995𝑥𝑥31 + 682𝑥𝑥32 + 388𝑥𝑥33 + 685𝑥𝑥34
𝑠𝑠. 𝑡𝑡.
𝑥𝑥11 + 𝑥𝑥12 + 𝑥𝑥13 + 𝑥𝑥14 = 75 Production
𝑥𝑥21 + 𝑥𝑥22 + 𝑥𝑥23 + 𝑥𝑥24 = 125 Constraints
𝑥𝑥31 + 𝑥𝑥32 + 𝑥𝑥33 + 𝑥𝑥34 = 100
𝑥𝑥11 + 𝑥𝑥21 + 𝑥𝑥31 = 80
𝑥𝑥12 + 𝑥𝑥22 + 𝑥𝑥32 = 65 Allocation
𝑥𝑥13 + 𝑥𝑥23 + 𝑥𝑥33 = 70 constraints
𝑥𝑥14 + 𝑥𝑥24 + 𝑥𝑥34 = 85
𝑥𝑥𝑖𝑖𝑖𝑖 ≥ 0, 𝑖𝑖 = 1,2,3; 𝑗𝑗 = 1,2,3,4 Non-negativity constraints

Total supply = Total demand

Integer solutions property: For transportation problems where every 𝑎𝑎𝑖𝑖 /𝑠𝑠𝑖𝑖 and 𝑏𝑏𝑗𝑗 /𝑑𝑑𝑗𝑗
have an integer value, all the basic variables (allocations) in every basic feasible
solution (including an optimal one) also have integer values.
Relationship between Prototype Example and General
Problem
 𝑚𝑚 𝑛𝑛

𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑍𝑍 = � � 𝑐𝑐𝑖𝑖𝑖𝑖 𝑥𝑥𝑖𝑖𝑖𝑖

𝑖𝑖=1 𝑗𝑗=1
𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑡𝑡𝑡𝑡:
𝑛𝑛

� 𝑥𝑥𝑖𝑖𝑖𝑖 = 𝑠𝑠𝑖𝑖 , 𝑖𝑖 = 1,2, … , 𝑚𝑚 Supply side constraint for point 𝑖𝑖

𝑗𝑗=1
𝑚𝑚

� 𝑥𝑥𝑖𝑖𝑖𝑖 = 𝑑𝑑𝑗𝑗 , 𝑗𝑗 = 1,2, … , 𝑛𝑛 Demand side constraint for point 𝑗𝑗

𝑖𝑖=1
𝑥𝑥𝑖𝑖𝑖𝑖 ≥ 0 ∀𝑖𝑖 = 1,2, … , 𝑚𝑚; 𝑗𝑗 = 1,2, … , 𝑛𝑛 Non-negativity constraints

where:
𝑚𝑚: number of origins
𝑚𝑚: number of destinations
𝑥𝑥𝑖𝑖𝑖𝑖 : quantity shipped from origin 𝑖𝑖 to destination 𝑗𝑗
𝑐𝑐𝑖𝑖𝑖𝑖 : unit cost of shipping from origin 𝑖𝑖 to destination 𝑗𝑗
𝑠𝑠𝑖𝑖 : supply at origin 𝑖𝑖
𝑑𝑑𝑗𝑗 : demand at destination 𝑗𝑗

GENERAL TRANSPORTATION
PROBLEM
Constraint Set

𝑥𝑥11 + 𝑥𝑥12 + 𝑥𝑥13 + 𝑥𝑥14 = 75

𝑥𝑥21 + 𝑥𝑥22 + 𝑥𝑥23 + 𝑥𝑥24 = 125
𝑥𝑥31 + 𝑥𝑥32 + 𝑥𝑥33 + 𝑥𝑥34 = 100
𝑥𝑥11 + 𝑥𝑥21 + 𝑥𝑥31 = 80
𝑥𝑥12 + 𝑥𝑥22 + 𝑥𝑥32 = 65
𝑥𝑥13 + 𝑥𝑥23 + 𝑥𝑥33 = 70
𝑥𝑥14 + 𝑥𝑥24 + 𝑥𝑥34 = 85
𝑥𝑥𝑖𝑖𝑖𝑖 ≥ 0, 𝑖𝑖 = 1,2,3; 𝑗𝑗 = 1,2,3,4

TRANSPORTATION PROBLEMS:
SPECIAL STRUCTURE
Constraint matrix as it appears in the Simplex Table
𝒙𝒙𝟏𝟏𝟏𝟏 𝒙𝒙𝟏𝟏𝟏𝟏 𝒙𝒙𝟏𝟏𝟏𝟏 𝒙𝒙𝟏𝟏𝟏𝟏 𝒙𝒙𝟐𝟐𝟐𝟐 𝒙𝒙𝟐𝟐𝟐𝟐 𝒙𝒙𝟐𝟐𝟐𝟐 𝒙𝒙𝟐𝟐𝟐𝟐 𝒙𝒙𝟑𝟑𝟑𝟑 𝒙𝒙𝟑𝟑𝟑𝟑 𝒙𝒙𝟑𝟑𝟑𝟑 𝒙𝒙𝟑𝟑𝟑𝟑
1 1 1 1

1 1 1 1

1 1 1 1

1 1 1

1 1 1

1 1 1

1 1 1

TRANSPORTATION PROBLEMS:
SPECIAL STRUCTURE
 SOLVING A TRANSPORTATION PROBLEM

After all it’s a linear program!

• Simplex method for LP
• Using Excel Solver, LINGO and other relevant
software
 Data input in the Spreadsheet
P&T Co. Distribution Problem

Unit Cost Destination (Warehouse)

Sacramento Salt Lake City Rapid City Albuquerque
Source Bellingham $464 $513 $654 $867
(Cannery) Eugene $352 $416 $690 $791
Albert Lea $995 $682 $388 $685

Shipment Quantity Destination (Warehouse)

(Truckloads) Sacramento Salt Lake City Rapid City Albuquerque Total Shipped Supply
Source Bellingham 0 20 0 55 75 = 75
(Cannery) Eugene 80 45 0 0 125 = 125
Albert Lea 0 0 70 30 100 = 100
Total Received 80 65 70 85
= = = = Total Cost
Demand 80 65 70 85 $1,52,535
 UNBALANCED
TRANSPORTATION
PROBLEM
 In real-life problems, total demand is frequently
not equal to total supply

These unbalanced problems can be handled

easily by introducing dummy sources or
Unbalanced dummy destinations

Transportation
Problems If 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

© 2009 Prentice-Hall, Inc. 10 – 20

 In either case, shipping cost coefficients of
zero are assigned to each dummy location or
route as no goods will actually be shipped

Unbalanced
Transportation
Any units assigned to a dummy destination
represent excess capacity
Problems

Any units assigned to a dummy source

represent unmet demand

© 2009 Prentice-Hall, Inc. 10 – 21

 CASE 1: TOTAL SUPPLY < TOTAL DEMAND
Consider the P & T COMPANY problem again with revised demand
quantities
Shipping cost ($)/ truckload
Warehouses
W1 W2 W3 W4 Production
Plant 1 464 513 654 867 75
Plant 2 352 416 690 791 125
Plant 3 995 682 388 685 100
Allocation 80 65 100 85 330 300

 In this situation, total supply quantity is less than the total

demand. So minimum one demand node will have a
shortfall.
 If total supply is less than total demand, the linear programming
model of a transportation problem will not have a feasible
solution. In this case, we modify the network representation by
adding a dummy origin with a supply equal to the difference
between the total demand and the total supply.
 CASE 1: TOTAL SUPPLY < TOTAL DEMAND

Shipping cost ($)/ truckload

Warehouses
W1 W2 W3 W4 Production
Plant 1 464 513 654 867 75
Plant 2 352 416 690 791 125
Plant 3 995 682 388 685 100

Dummy 0 0 0 0 30
Allocation 80 65 100 85 330 330
 CASE 1: TOTAL SUPPLY < TOTAL DEMAND
P&T Co. Distribution Problem
Unit Cost Destination (Warehouse)
Sacramento Salt Lake City Rapid City Albuquerque
Source Bellingham $464 $513 $654 $867
(Cannery) Eugene $352 $416 $690 $791
Albert Lea $995 $682 $388 $685
Dummy $0 $0 $0 $0

Shipment Quantity Destination (Warehouse)

(Truckloads) Sacramento Salt Lake City Rapid City Albuquerque Total Shipped Supply
Source Bellingham 0 20 0 55 75 = 75
(Cannery) Eugene 80 45 0 0 125 = 125
Albert Lea 0 0 100 0 100 = 100
Dummy 0 0 0 30 30 = 30
Total Received 80 65 100 85
= = = = Total Cost
Demand 80 65 100 85 $1,43,625

As per the above solution, Albuquerque will have

shortfall of 30 units. That is instead of required 85
units, it will only receive 55 units.
 CASE 2: TOTAL SUPPLY > TOTAL DEMAND
Consider the P & T COMPANY problem again with revised supply
quantities
Shipping cost ($)/ truckload
Warehouses
W1 W2 W3 W4 Production
Plant 1 464 513 654 867 75
Plant 2 352 416 690 791 125
Plant 3 995 682 388 685 150
Allocation 80 65 70 85 300 350

 In this situation, total supply quantity is more than the total demand.
So minimum one supply node will have a excess supply as slack.

 If total supply exceeds total demand, no modification in the linear

programming formulation is necessary. However, more consistency
we modify the LPP. In this case, we modify the network
representation by adding a dummy demand with a demand equal
to the difference between the total supply and the total demand.
 CASE 2: TOTAL SUPPLY > TOTAL DEMAND

Shipping cost ($)/ truckload

Warehouses
W1 W2 W3 W4 Dummy Production
Plant 1 464 513 654 867 0 75
Plant 2 352 416 690 791 0 125
Plant 3 995 682 388 685 0 150
Allocation 80 65 70 85 50 350 350
 CASE 2: TOTAL SUPPLY > TOTAL DEMAND
P&T Co. Distribution Problem
Unit Cost Destination (Warehouse)
Sacramento Salt Lake City Rapid City Albuquerque Dummy
Source Bellingham $464 $513 $654 $867 $0
(Cannery) Eugene $352 $416 $690 $791 $0
Albert Lea $995 $682 $388 $685 $0

Shipment Quantity Destination (Warehouse)

(Truckloads) Sacramento Salt Lake City Rapid City Albuquerque Dummy Total Shipped Supply
Source Bellingham 0 20 0 5 50 75 = 75
(Cannery) Eugene 80 45 0 0 0 125 = 125
Albert Lea 0 0 70 80 0 150 = 150
Total Received 80 65 70 85 50
= = = = = Total Cost
Demand 80 65 70 85 50 $1,43,435

As per the above solution, Bellingham will have excess

supply as slack of 50 units. Other sources exhausted with
their supply.
 CASE 3: NOT ALL SUPPLY-DEMAND LINKS EXIST
Consider the P & T COMPANY problem again with the requirement that
no route exist between Plant 2 and Warehouse 2

Shipping cost / truckload

W1 W2 W3 W4 Production
Plant 1 464 513 654 867 75
Plant 2 352 ----- 690 791 125
Plant 3 995 682 388 685 100
Allocation 80 65 70 85

--- Quantity cannot be shipped for this combination of source and destination

Shipping cost / truckload

W1 W2 W3 W4 Production
Plant 1 464 513 654 867 75
Plant 2 352 Infinity/M 690 791 125
Plant 3 995 682 388 685 100
Allocation 80 65 70 85
CASE 3: NOT ALL SUPPLY-DEMAND LINKS EXIST
P&T Co. Distribution Problem
Unit Cost Destination (Warehouse)
Sacramento Salt Lake City Rapid City Albuquerque
Source Bellingham $464 $513 $654 $867
(Cannery) Eugene $352 $1,000 $690 $791
Albert Lea $995 $682 $388 $685

Shipment Quantity Destination (Warehouse)

(Truckloads) Sacramento Salt Lake City Rapid City Albuquerque Total Shipped Supply
Source Bellingham 0 65 0 10 75 = 75
(Cannery) Eugene 80 0 0 45 125 = 125
Albert Lea 0 0 70 30 100 = 100
Total Received 80 65 70 85
= = = = Total Cost
Demand 80 65 70 85 $1,53,480

As per the requirement of no route between Plant 2

and warehouse 2, the obtained solution clearly
indicates Salt Lake City will not receive any amount
of commodity from the Eugene, i.e., 𝒙𝒙𝟐𝟐𝟐𝟐 = 0.
APPLICATIONS
 Originated in the
context of
IS IT ONLY
transportation
ABOUT
TRANSPORTING
GOODS? It is the problem
structure that classifies
as a transportation
problem
 APPLICATION: PRODUCTION SCHEDULING

XYZ Co. has to determine the number of product A that it should produce
in each of the next four months so as to minimize the total production and
storage cost. Data about its contracted deliveries, production capacity, unit
cost of production, and storage are as given below:

Contracted Maximum Unit cost of Unit cost of

Month
Deliveries Production production storage/month
1 10 25 1.08 0.015
2 15 35 1.11 0.015
3 25 30 1.10 0.015
4 20 10 1.13 0.015

Formulate this problem as a transportation problem.

 1. Source 𝒊𝒊:

2. Destination 𝒋𝒋:

3. Supply at source 𝒊𝒊, 𝒔𝒔𝒊𝒊 :

4. Demand at destination 𝒋𝒋, 𝒅𝒅𝒋𝒋 :

5. Cost of transportation from

source 𝒊𝒊 to destination 𝒊𝒊, 𝒄𝒄𝒊𝒊𝒋𝒋 :

REQUIRED INFORMATION
1. Source 𝒊𝒊: Production in month 𝑖𝑖

2. Destination 𝒋𝒋: Deliveries in month 𝑗𝑗

3. Supply at source 𝒊𝒊, 𝒔𝒔𝒊𝒊 : Production capacity in month 𝑖𝑖

4. Demand at destination 𝒋𝒋, 𝒅𝒅𝒋𝒋 : Number of scheduled deliveries in

month 𝑗𝑗

5. Cost of transportation from source 𝒊𝒊 to destination 𝒊𝒊, 𝒄𝒄𝒊𝒊𝒋𝒋 :

Cost of production + storage (if any) … if 𝑖𝑖 ≤ 𝑗𝑗
Infinity … if 𝑖𝑖 > 𝑗𝑗

INFORMATION IN PRODUCTION
SCHEDULING SCENARIO
 D1 -10
25 P1

35 P2 1.11
D2 -15

30 P3 1.10
D3 -25
10 P4

D4 -20

NETWORK FIGURE
 Total cost
Month 1 Month 2 Month 3 Month 4 Production
Month 1 Prod Cost Prod Cost +Stor Prod Cost +2 Prod Cost +3 25
= Cost = *Stor Cost= *Stor Cost=

1.080 1.095 1.110 1.125

Month 2 - 1.110 1.125 1.140 35
Month 3 - - 1.100 1.115 30
Month 4 - - - 1.130 10
Deliveries 10 15 25 20 70 100
Production-Scheduling Problem
Production Cost Storage Cost
($millions) ($millions per month)
1 1.08 0.015
Month 2 1.11
Produced 3 1.10
4 1.13

Unit Cost Month Installed

($millions) 1 2 3 4
1 1.080 1.095 1.110 1.125
Month 2 1000.000 1.110 1.125 1.140
Produced 3 1000.000 1000.000 1.100 1.115
4 1000.000 1000.000 1000.000 1.130

Month Installed Maximum

Units Produced 1 2 3 4 Produced Production
1 10 10 5 0 25 <= 25
Month 2 0 5 0 0 5 <= 35
Produced 3 0 0 20 10 30 <= 30
4 0 0 0 10 10 <= 10
Installed 10 15 25 20
= = = = Total Cost
Scheduled Installations 10 15 25 20 ($millions)
77.3
TRANSPORTATION PROBLEMS: MORE
APPLICATIONS
MWD administers water distribution in a large region. Water is imported from three rivers
and is then resold to four cities in the region.
It is possible to supply any of these cities from any of the rivers except for City 4 which
can not be supplied water from River 3. Water distribution costs differ for different city-
river combinations and are given in the table below.
MWD is committed to provide each city a certain minimum amount of water to meet its
essential needs. Each city also has an upper limit on the amount of water that it can
receive which depends on its storage capacity.
Cost (tens of Rs) per Acre Foot
City 1 City 2 City 3 City 4 Supply
River 1 16 13 22 17 50
River 2 14 13 19 15 60
River 3 19 20 23 --- 50
Minimum needed 30 70 0 10 (in units of Mn
Requested 50 70 30 ∞ acre feet)

Determine the distribution plan if all the available water is to be distributed in such a
way as to at least meet the essential needs of each city while minimizing the total cost
to MWD.
WATER DISTRIBUTION AT MWD
 Preferred distribution plan would be to meet each
city’s requested demand
 Can never meet City 4’s requested demand

 How much of it can be met (in addition to its minimum)?

 (50 + 60 + 50 ) – (30 + 70 + 0 + 10) = 50

 But now total demand = (50 + 70 + 30 + 60) = 210

 Total supply = (50 + 60 + 50) = 160

 Excess demand = 210 – 160 = 50, what to do ?
WATER DISTRIBUTION AT MWD

Cost (tens of Rs) per Acre Foot

City 1 City 2 City 3 City 4 Supply
River 1 16 13 22 17 50
River 2 14 13 19 15 60
River 3 19 20 23 --- 50
Dummy 0 0 0 0 50
Demand 50 70 30 60

But would it not violate the minimum needed water constraint?

WATER DISTRIBUTION AT MWD

Cost (tens of Rs) per Acre Foot

City 1 City 1
City 2 City 3 City 4 Supply
(min) (extra)
River 1 16 16 13 22 17 50
River 2 14 14 13 19 15 60
River 3 19 19 20 23 M 50
Dummy M 0 M 0 0 50
Demand 30 20 70 30 60
WATER DISTRIBUTION AT MWD
Metro Water District Distribution Problem
Unit Cost City 1 (min) City 1 (Extra) City 2 City 3 City 4
River 1 16 16 13 22 17
River 2 14 14 13 19 15
River 3 19 19 20 23 1000
Dummy 1000 0 1000 0 0

Water Distribution Total

(million ac City 1 (min) City 1 (Extra) City 2 City 3 City 4 From River Available
River 1 0 0 50 0 0 50 = 50
River 2 0 0 20 0 40 60 = 60
River 3 30 20 0 0 0 50 = 50
Dummy 0 0 0 30 20 50 = 50

Needed 30 20 70 30 60 Total Cost

= = = = = 2,460
30 20 70 30 60

 City 1 receives: 50 units of water, that is, its upper limit. Hence, 20 units more
than minimum requirement of 30 units.
 City 2 receives: 70 units of water, that is, it is lower and upper limit
 City 3 receives: 30 units but from dummy, therefore, practically it is receiving 0 unit of
water and satisfying its minimum requirement
 City 4 receives: 60 units but 20 from dummy, therefore, practically it is receiving 40
units. Hence, 30 units more than minimum requirement of 10 units.
SUPPLIER SELECTION PROBLEM
SUPPLIER SELECTION PROBLEM
 SUPPLIER SELECTION PROBLEM
Supplier Selection
Unit Cost Month 1 Month 2 Month 3 Month 4 Dummy
Supplier 1 55 60 52 48 0
Supplier 2 60 54 55 45 0
Supplier 3 48 50 60 50 0
Supplier 4 53 55 49 54 0

Distribution Total
Month 1 Month 2 Month 3 Month 4 Dummy From Supplier Available
Supplier 1 0 200 0 0 0 200 = 200
Supplier 2 250 0 0 0 0 250 = 250
Supplier 3 0 0 150 0 0 150 = 150
Supplier 4 50 0 0 75 100 225 = 225

Received 300 200 150 75 100 Total Cost

= = = = = 42,700
300 200 150 75 100

Company is meeting its requirement of each month as follows:

Month 1: Required 300 units as: 250 from Supplier 2 and 50 from Supplier 4
Month 2: Required 200 units as: 200 from Supplier 1
Month 3: Required 150 units as: 150 from Supplier 3
Month 1: Required 75 units as: 75 from Supplier 4
Supplier 4 have excess supply as slack of 100 units. Other suppliers
exhausted with their available units.
 FACILITY LOCATION ANALYSIS

 Transportation method especially useful

 New location is major financial importance
 Several alternative locations evaluated
 Subjective factors are considered
 Final decision also involves minimizing total
shipping and production costs
 Alternative facility locations analyzed within the
framework of one overall distribution system
 FACILITY LOCATION ANALYSIS

 Hardgrave Machine Company produces computer

components in Cincinnati, Salt Lake City, and
Pittsburgh
 Four warehouses in Detroit, Dallas, New York, and
Los Angeles
 Two new plant sites being considered – Seattle
and Birmingham
 Which of the new locations will yield the lowest
cost for the firm in combination with the existing
plants and warehouses?
TABLE: DEMAND AND SUPPLY DATA
TABLE: DEMAND AND SUPPLY DATA
FORMULATION
FORMULATION
FORMULATION
FORMULATION