UNIT 3.

TRANSPORTATIONS PROBLEMS Introduction: A special class of linear programming problem is

Transportation Problem, where the objective is to minimize the cost of distributing / transporting a
product from a number of sources (e.g. factories) to a number of destinations (e.g. warehouses) while
satisfying both the supply limits and the demand requirement. Because of the special structure of the
Transportation Problem the Simplex Method of solving is unsuitable for the Transportation Problem. The
model assumes that the distributing cost on a given rout is directly proportional to the number of units
distributed on that route. Generally, the transportation model can be extended to areas other than the
direct transportation of a commodity, including among others, inventory control, employment scheduling,
and personnel assignment.

Balanced Transportation Problem:

Balanced Transportation Problem is a transportation problem where the total availability at the origins is
equal to the total requirements at the destinations. For example, in case the total production of 4 factories
is 1000 units and total requirements of 4 warehouses is also 1000 units, the transportation problem is said
to be a balanced one.

Unbalanced Transportation Problem

Unbalanced transportation problem is a transportation problem where the total availability at the origins is
not equal to the total requirements at the destinations. For example, in case the total production of 4
factories is 1000 units and total requirements of 4 warehouses is 900 units or 1,100 units, the transportation
problem is said to be an unbalanced one. To make an unbalanced transportation problem, a balanced one,
a dummy origins) or a dummy destination (s) (as the case may be) is introduced with zero transportation
cost per unit.

Dummy Origin/Destination:

A dummy origin or destination is an imaginary origin or destination with zero cost introduced to make an
unbalanced transportation problem balanced. If the total supply is more than the total demand we
introduce an additional column which will indicate the surplus supply with transportation cost zero.
Likewise, if the total demand is more than the total supply, an additional row is introduced in the Table,
which represents unsatisfied demand with transportation cost zero.

Practical Steps Involved In Solving Transportation Problems Of Minimization Type

The practical steps involved in solving transportation problems of minimization type are given below:

Step 1- See whether Total Requirements are equal to Total Availability; if yes, go to Step 2; if not, Introduce
a Dummy Origin/Destination, as the case may be, to make the problem a balanced one Taking Transportation
Cost per unit as zero for each Cell of Dummy Origin/Destination or as otherwise indicated.

Step 2- Find Initial Feasible Solution by following either the Least Cost Method (or LCM) or North-West
Comer Method (or NWCM) or Vogel’s Approximation
Method (or VAM)

Step 3- After obtaining the Initial Feasible Solution Table, see whether Total Number of Allocations are equal
to “m + n - 1”,; if yes, go to Step 4; if not, introduce an infinitely small quantity Independent Cell. (i.e., for
which no Loop can be formed).
Note: Introduce as many number of ‘e’ as the total number of allocated cells falls below “m + n -1”.

Step 4- Optimality Test: Carry out the Optimality Test on the Initial Solution Table to find out the optimal
solution. Step 5 – Calculate the Total Minimum
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Cost = S (X ij x C ij),
where, X = Units Allocated to a Cell; C = Shipping Cost
per Unit of a Cell;
i = Row Number;
j = Column Number

Practical Steps Involved In Solving Transportation Problems of Maximization Type:

The practical steps involved in solving transportation problems of maximization type are given below:

Step 1- 1Derive Profit Matrix by calculating the Profit by the following equation: .

Profit = Selling Price - Production Cost - Transportation Cost

Step 2- See whether Total Requirements are equal to Total Availability; if yes, go to Step 3; if not, introduce
a Dummy Origin/Destination, as the case may be, to make the problem a balanced one, taking Profit per
unit as zero for each Cell of Dummy Origin/Destination or as otherwise indicated.

Step 3 - Derive Loss Matrix by deducting each element from the largest element in order to use minimization
technique.

Step 4- After obtaining the Initial Feasible Solution Table, see whether Total Number of Allocations are equal
to “m + n - 1”,; if yes, go to Step 5; if not, introduce an infinitely small quantity’ e’ to the Least Cost
Independent Cell. (i.e., for which no Loop can be formed). Note:Introduce as many number of ‘e’ as the total
number of allocated cells falls below “m + n -1”.

Step 5 - Optimality Test: Carry out the Optimality Test on the Initial Solution Table to find out the optimal
solution.

Step 6 - Calculate the Maximum Profit = Zigma (Xij x Pij)

where, X = Units Allocated to a Cell;

P = Profit per Unit of a Cell; i = Row Number;
j = Column Number

Finding Initial (or Basic) Feasible Solution:

In general, any basic feasible solution of a transportation problem with m origins (such as factories) and n
destinations (such as warehouses) should have ‘m + n - l’ non zero basic variables.

A transport problem is said to be a degenerate transport problem if it has a basic feasible solution with
number of nonzero basic variables less than m + n -1.

According to Must fit, “A degenerate basic feasible solution in a transportation problem exists if and only if
some partial sum of availabilities (row) is equal to a partial sum of requirements (column)”.

Initial feasible solution can be obtained by any of the following three methods:

Method I : Least Cost Method (or LCM)

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Method II : Northwest Comer Method (or NWCM)

Method III : Vogel’s Approximation Method (or VAM)

Let us discuss these methods one by one as under:

Method I: Least Cost Method (or LCM):

The practical steps involved in the Least Cost Method are given below:

Step 1: Make maximum possible Allocation to the Least. Cost Cell depending upon the demand/supply for
the Column Row containing that Cell. In case of Tie in the Least Cost Cells, make allocation to the Cell by
which maximum demand or capacity is exhausted.

Step 2: Make allocation to the Second Lowest Cost Cell depending upon the remaining demand/supply for
the Row/ Column containing that Cell.

Step 3: Repeat the above Steps till all Rim Requirements are exhausted, Le., entire demand and supply is
exhausted.

Method II: North-west Corner Method (or NWCM):

The practical steps involved in the North-West Comer Method are given below:

Step 1: Make maximum possible allocation to the Upper-Left Comer Cell (also known as North-West Comer
Cell) in the First Row depending upon the availability of supply for that Row and demand requirement for
the Column containing that Cell.
Note: Unit transportation cost is completely ignored.

Step 2: Move to the Next Cell of the First Row depending upon remaining supply for that Row and the
demand requirement for the next Column. Go on till the Row total is exhausted.

Step 3: Move to the next Row and make allocation to the Cell below the Cell of the preceding Row in which
the last allocation was made and follow Steps I and 2.

Step 4: Follow Steps I to 3 till all Rim requirements are exhausted, i.e., the entire demand and supply is
exhausted.

Method III: Vogel’s Approximation Method (or VAM):

The practical steps involved in Vogel’s Approximation Method (or VAM) are given below:

Step 1: Row Difference: Find the difference between Smallest and Second Smallest element of each Row,
representing the. Opportunity Cost of not making the allocation to the Smallest Element Cell, and write the
difference on the right-hand side of the concerned Row. In case of tie between two smallest elements, the
difference should be taken as zero.

Step 2: Column Difference: Find the difference between Smallest and Second Smallest element of each
column, representing the Opportunity Cost of not making the allocation to the Smallest Element Cell, and
write the difference below the concerned Column. In case of tie between two smallest elements, the
difference should be taken as zero.

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Step 3: Make the Largest Difference amongst all Differences by an arrow indicating the allocation to be made
to the row/ column having largest difference. Allocate maximum possible quantity to the Least Cost Cell of
the Selected row/column depending upon the quantity available. In case of tie between the Differences,
select the row or column having least cost cell.

However, in case of tie even in case of Least Cost, make allocation to that Cell by which maximum
requirements are exhausted.

Step 4: Shade the Row/Column whose availability or requirement is exhausted so that it shall not be
considered for any further allocation.

Step 5: Repeat Step 3 and 4 till entire demand and supply is exhausted.

Step 6: Draw the Initial Feasible Solution Table obtained after the above steps.

Application of Optimality Test by MODI (Modified Distribution) Method:

Note: While taking any Ui or Vj=0, that row or column which is having maximum allocated cells, should
preferably be selected.

Compute Opportunity Cost, or say OC, for Unallocated Cells

Where
OC =Cij-(Uij + Vij.)

If ‘OC’ of each cell is either positive or zero, Initial Feasible Solution is the Optimal Solution. However, if ‘OC’
for any Cell is negative, Initial Feasible Solution is not optimal. In that case, Find Closed Loop for the Cell
having negative ‘OC’ and transfer entire quantity from the Allocated Cell having minimum quantity, that is
covered by that Loop amongst all Allocated Cells covered by that Loop, to the Unallocated Cell having
negative ‘OC’.

Note: The above procedure will be followed even in case ‘OC’ of any Unallocated Cell is “zero” and ‘OC’ of
other Unallocated Cells is positive to get Alternate Solution.

See whether total number of allocated cells after Step 3 is equal to “m + n -1”; if yes, go to step 5 if not
introduce an infinitely small quantity ‘e’ to the Least Cost Independent Cell, Le., for which no Loop can be
formed.

Note: Introduce as many number of ‘e’ as the total number of Allocated Cells falls below “m + n - 1”.

Repeat Steps 1 to 4 till ‘OC’ of all Unallocated Cells is, positive.

Degeneracy In Transportation Problems:

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The solution procedure for non-degenerate basic feasible solution with exactly m + n - 1 strictly positive
allocations in independent positions has been discussed so far. However, sometimes it is not possible to get
such initial feasible solution to start with.

Thus degeneracy occurs in the transportation problem whenever a number of occupied cells is less than m
+ n - 1.

We recall that a basic feasible solution to an m-origin and n-destination transportation problem can have at
most m + n – 1 number of positive (non- zero) basic variables. If this number is exactly m + n - I, the BPS is
said to be non-degenerate; and if less than m + n - 1 the basic solution degenerates. It follows that whenever
the number of basic cells is less than m + n - I, the transportation problem is a degenerate one.

Degeneracy in transportation problems can occur in two ways:

1. Basic feasible solutions may be degenerate from the initial stage onward.

2. They may become degenerate at any intermediate stage.

Resolution of Degeneracy during the Initial Stage:

To resolve degeneracy, allocate an extremely small amount of goods (close to zero) to one or more of the
empty cells so that a number of occupied cells becomes m + n - I. The cell containing this extremely small
allocation is, of course, considered to be an occupied cell.

Rule: The extremely small quantity usually denoted by the Greek letter ~ (delta) [also sometimes by E
(epsilon)] is introduced in the least cost independent cell subject to the following assumptions. If necessary,
two or more Ñ ‘ s can be introduced in the least and second least cost independent cells.

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