CHAPTER THREE

TRANSPORTATION AND ASSIGNMENT MODELS

3.1. INTRODUCTION
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 requirements. The
transportation and assignment models are designed to address these LPPs of special formation and
objectives. 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.
3.2. TRANSPORTATION PROBLEMS AND MODELS
Transportation problems deal with the distribution of goods from several points of supply (sources) to
a number of points of demand (destinations). They are usually applied to distribution type problems in
which supplies of goods that are held at various locations are to be distributed to other receiving
locations.
Objective of the transportation model
 to identify a distribution plan that would minimize the cost of transporting the goods from the
supply areas to the demand areas taking into account supply capacities and demand requirements
as well as transportation costs.
Application areas
Wecan use transportation model for various types of problems. For example:
 Shipments from factories to warehouses
 Shipments between departments within a company
 Analysis and selection among location alternative
 scheduling production operations etc
Necessary conditions for the model
A transportation problem typically involves a set of sending locations which are referred to as
origins(supply areas ) and a set of receiving locations which are referred to as destinations ( demand
areas). In order to develop a model of a transportation problem it is necessary to have the following
information:
1. Supply quantity (capacity) of each origin
2. Demand quantity of each destination
3. Unit transportation cost for each origin- destination route
Assumptions
The transportation model works under circumstances defined by certain assumptions some of
which are specified below.
1. All goods be homogeneous
2. Transportation costs are a direct linear function of the quantity shipped over any route
3. The total quantity available for shipment is equal to the total quantity demande
The characteristics of transportation problem
1. A limited supply of one commodity is available at certain sources or origins.
2. There is 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 about determining how many units should be shipped from each source to each
destination so that all demands are satisfied at the minimum total shipping costs.
Example
Let’s consider that a firm has three factories /sources of supply/ from which it ships its product out
puts to four warehouses /point of demand/ located at various regions where its customer bases are
concentrated. 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 each factory to
the warehouses through each route is given as follows:
Factories Weekly supply capacity/in units
F1 5000
F2 6000
F3 2500

Warehouses weekly Demand quantity/ in units

W1 6000
W2 4000
W3 2000
W4 1500

Cost (in Birr) per unit

FromW1 W2 W3 W4

F1 3 2 7 6
F2 7 5 2 3
F3 2 5 4 5
3.3.1. Solving for transportation problems
Solution Procedure
The solution algorithm to a transportation problem is summarized into the following steps:
Step 1: Formulate the transportation table
o Set up a transportation table with M- rows representing the number of supply areas and
N- columns representing the number of demand areas.
o The formulation of the problem is similar to that of linear programming. Here the
objective function is designed to minimize the total transportation cost and the constraints
are the supply and demand available at each source and destination respectively. The
origins are listed down the left side of the table, and the respective supply quantities are
listed down the right side of the table. The demand destination points are represented at
the top each column where as their respective requirements are specified at the bottom.
Step 2: Obtain an initial basic feasible solution
 For this there are 3 methods to find the initial feasible solution.
 North-West Corner Method (NWCM)
 Least Cost Method (LCM)
 Vogel’s Approximation Method (VAM)
Example
o If M=3 origins and N=4 destinations ==>M+N-1=3+4 -1=6 (i.e. for problem to have a
feasible solution, the transportation model/table should have 6 occupied cells).
o If the number of occupied cells is less than m+n-1, the solution is said to have degenerated, a
situation we shall discuss as one of the special issues in transportation problems.
Step 3: Test the initial solution for optimality
o If the current solution is optimal, then stop. Otherwise, determine the new improved solution.
o Two methods can be used to test feasible solutions for optimality
1. Stepping stone methods
2. Modified distribution method( MODI)
Step 4: Repeat step 3 until an optimal solution is reached
Example
 Now let’s solve the factory-warehouse (the details are already provided above) problem
based on the rules and methods illustrated in the solution procedure.
1. CONSTRUCTING THE TRANSPORTATION TABLE/MODEL
Summarize all the given (supply, demand, and costs) information in the tabular form/model
as follows.
Destinations (dd) =j
Origin (Supply) W1 W2 W3 W4 Factory Capacity =i

F1 3 2 7 6 5000

F2 7 5 2 3 6000

F3 2 5 4 5 2500

Requirements of the
Warehouses
6000 4000 2000 1500 13500
( Units of demand)

Note that we can solve the problem using LPPM, because transportation problem is a special type of
LPPM. It is just about formulating it as LPPM which can be done as follows:
o Let xij =The amount of commodity to be transported form source i (i =1,2,3) to
destination j ( j= 1,2,3,4).
o Then the objective function of the problem (minimization of the total transportation
cost) can be formulated as:
Min Z = 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 =6000F2 supply constraint
x31 +x32 +x33+x34 = 2500F3supply constraint
b.Demand constraints:
x11 + x21 + x31 = 6000 W1 demand constraint
x12 + x22 + x32 = 4000 W2demand 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.
To conceptualize the problem easily let’s represent of the problem using a Net work flow diagram
Origin Destination centers
(Sources of Supply)
(Point of demand centers

F1 5000 3
2 W1 6000
6 7

7
F2 6000 5
W2 4000
3 2
2
5
F3 2500 4
W3 2000
5

W4 1500
This LPP has 12 shipping routes. Determining the set of routes with the minimum total cost would be
the objective of the solution procedure and the transportation table prepares the problem for its
feasible then optimal solution.
2. FINDING INITIAL FEASIBLE SOLUTION FOR A TRANSPORTATION PROBLEM
METHODS/TECHNIQUES
There are several methods available to obtain an initial feasible solution of a transportation problem.
Here we shall discuss only three methods to obtain the initial feasible solution: each method has its
own rationales and merits that make it considered under certain circumstances. Our discussion,
therefore, will not be about comparing each method. We will rather try to develop feasible solutions
using each method as a rational approach to solve for transportation problems.

A. North- West Corner Method (NWCM)

This method does not take into account the cost of transportation on any route of transportation. It
rather focuses on physical proximity between supply origins and demand destination points to
generate the feasible solution.
The NWCM gets its name because it argues that the starting point for the allocation process should be
the Upper Left-hand (Northwest) corner of the transportation table.
Northwest corner rules
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 the amount allocated from the row supply & from the column demand and write
the remaining balance on the row and column.
3. If the column demand is 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 Consider the following transportation problem:

T Store 1 Store 2 Store 3 Store 4 Supply

F
Plant 1 19 30 50 10 7

Plant 2 70 30 40 60 9

Plant 3 40 8 70 20 18

Demand 5 8 7 14 34

Required
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 7
 5 2
Plant 2 70 30 40 60 9
6 3
Plant 3 40 8 70 20 18
4 14
Demand 5 8 7 14 34

Check that the solution is feasible.

==>m + n-1; m=3 and n=4  3+4-1= 6 cells are occupied, so the solution is feasible.
The total transportation cost of the initial feasible solution derived by the NWCM is:

Route Unit Per unit Total

FromTo Shipped 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.
Example 2
1. Determine an initial basic feasible solution to the following transportation problem using NWCM
and compute the total cost for this solution
Destination
Origins 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 34
Answer: X11=5, X21=2, X22=6, X32=3, X33=4, X43=4, and Total cost =$10
Exercise/s
1. Consider that Haile's Sand &Gravel Pit has contracted to provide topsoil for three residential
housing developments. Topsoil can be supplied from three different “farms" as follows:
________________________________________________________
Weekly Capacity
Farm (Cubic meters)
A 100
B 200
C 200
_________________________________________________________________

Demand for the topsoil generated by the construction projects is:

_______________________________________________________________________________
Weekly Demand
Project (Cubic meters)
1 50
2 150
3 300
_______________________________________________________________
 The manager of the sand & gravel pit has estimated the cost per cubic meter to ship over each
of the possible routes in Birr as follows:

Costs per cubic meter

Destinations

Origins Project # 1 Project #2 Project #3

Farm A 4 2 8
Farm B 5 1 9
Farm C 7 6 3

Required
o Develop the initial feasible solution using NWCM & compute the total cost for this solution.
B. The Least- Cost Method (LCM)
LCMis the method that considers the transportation cost the criteria to select the mix of the routes to
be used for transportation. It begins a solution by sequentially assigning to the cells with the
minimum costas many units as possible. The first allocation is made to the cell with the lowest cost.
The Least- Cost Methodyields not only an initial feasible solution but also one that is close to
optimal in small problems.
Example 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
Origins W1 W2 W3 W4 Factory
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
a. Initial feasible solution using NWCM
W1 W2 W3 W4 Factory Capacity
F1 3 2 7 6 5000
5000
Factory 7 5 2 3
F2 6000
1000 4000 1000
F3 2 5 4 5 2500
1000 1500
Demand 6000 4000 2000 1500 13500

Let’s check the solution for feasibility

m= 3, n =4 ==> 3+4 -1 =6 cells are occupied, indicating a feasible solution
 The total cost of the solution is computed as follows

FromTo Units Shipped Unit Cost Total Cost

F1 W 1 5000 3 Br.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 =Br. 55,500

b. Initial feasible solution using LCM

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

Routes Units Unit Total cost

FromTo Shipped X Cost
F1 W1 1000 3 Br. 3000
F1 W2 4000 2 8000
F2 W1 2500 7 17500
F2 W3 2000 2 4000
F2 W4 1500 3 4500
F3 W1 2500 2 5000
Total transportation cost = Birr 42,000

Since m= 3, n=4 ==> 3+4-1 = 6 is the number of occupied cells, the solution is feasible.
Example 2
Develop the initial feasible solution for the following TP using the least-cost method (LCM)
To D E F G Supply
From

A 1 5 3 4 100

B 4 2 2 5 60

C 3 1 2 4 120
DD 70 50 100 60 280

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

Destination D E F G Supply
Source
A 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 meaning the solution is feasible.

Routes Units Unit Total

FromTo Shipped X Cost in birr =Cost
A D 70 1 Br.70
B F 30 2 60
B G 30 5 150
C E 50 1 50
C F 70 2 140

Total transportation cost = Br. 470

C. Vogel's Approximation Method (VAM) or Penalty Cost Method

VAM prefers to solve transportation problems from a different angle other than those considered in
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 been incurred if allocation in certain cells with
minimum unit transportation cost were missed. 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.

In this method allocation is 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.
The steps in the VAM solution procedure are listed down 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 it 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 feasible solution to the following transportation problem using VAM.
Warehouse
Row difference or Row penalty
A B C D Supply
F1 2 2 0 4 25 or opportunity cost
Factory 5 20
F2 5 9 8 3 25
15 5 5 2 0 - - -

F3 6 4 3 2 10
10
Demand 20 15 20 5 60
2 2 2 2 5
Column difference 3 2 3 1

orColumn penalty

or opportunity cost 3 2 - 1
1 2 2 - -

1 5 - 1

Feasibility
o m= 3, n=4 ==> 3+4-1 =6 occupied cells (feasible)
5 9 - -
Total transportation cost associated with this solution is:
o Total cost= 5x2 + 20x0+15x5x9 =+95x3+10x4= $185
5 - - -