Transportation, Assignment and

Transshipment Problems
accompany
Introduction to Mathematical Programming: Operations Research, Volume 1
4th edition, by Wayne L. Winston and Munirpallam Venkataramanan

Presentation: H. Sarper

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 Description
A transportation problem basically deals with the
problem, which aims to find the best way to fulfill
the demand of n demand points using the
capacities of m supply points. While trying to find
the best way, generally a variable cost of shipping
the product from one supply point to a demand
point or a similar constraint should be taken into
consideration.

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 7.1 Formulating Transportation
Problems
Example 1: Powerco has three electric
power plants that supply the electric needs
of four cities.
•The associated supply of each plant and
demand of each city is given in the table 1.
•The cost of sending 1 million kwh of
electricity from a plant to a city depends on
the distance the electricity must travel.
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 Transportation tableau

A transportation problem is specified by

the supply, the demand, and the shipping
costs. So the relevant data can be
summarized in a transportation tableau.
The transportation tableau implicitly
expresses the supply and demand
constraints and the shipping cost between
each demand and supply point.

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 Table 1. Shipping costs, Supply, and Demand
for Powerco Example

From To
City 1 City 2 City 3 City 4 Supply
(Million kwh)
Plant 1 $8 $6 $10 $9 35
Plant 2 $9 $12 $13 $7 50
Plant 3 $14 $9 $16 $5 40
Demand 45 20 30 30
(Million kwh)
Transportation Tableau
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 Solution
1. Decision Variable:
Since we have to determine how much electricity
is sent from each plant to each city;

Xij = Amount of electricity produced at plant i

and sent to city j

X14 = Amount of electricity produced at plant 1

and sent to city 4
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 2. Objective function

Since we want to minimize the total cost of shipping

from plants to cities;

Minimize Z = 8X11+6X12+10X13+9X14
+9X21+12X22+13X23+7X24
+14X31+9X32+16X33+5X34

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 3. Supply Constraints
Since each supply point has a limited production
capacity;

X11+X12+X13+X14 <= 35
X21+X22+X23+X24 <= 50
X31+X32+X33+X34 <= 40

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 4. Demand Constraints
Since each supply point has a limited production
capacity;

X11+X21+X31 >= 45
X12+X22+X32 >= 20
X13+X23+X33 >= 30
X14+X24+X34 >= 30

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 5. Sign Constraints
Since a negative amount of electricity can not be
shipped all Xij’s must be non negative;

Xij >= 0 (i= 1,2,3; j= 1,2,3,4)

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 LP Formulation of Powerco’s Problem
Min Z = 8X11+6X12+10X13+9X14+9X21+12X22+13X23+7X24
+14X31+9X32+16X33+5X34

S.T.: X11+X12+X13+X14 <= 35 (Supply Constraints)

X21+X22+X23+X24 <= 50
X31+X32+X33+X34 <= 40
X11+X21+X31 >= 45 (Demand Constraints)
X12+X22+X32 >= 20
X13+X23+X33 >= 30
X14+X24+X34 >= 30
Xij >= 0 (i= 1,2,3; j= 1,2,3,4)
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 General Description of a Transportation
Problem
1. A set of m supply points from which a good is
shipped. Supply point i can supply at most si
units.
2. A set of n demand points to which the good is
shipped. Demand point j must receive at least di
units of the shipped good.
3. Each unit produced at supply point i and shipped
to demand point j incurs a variable cost of cij.

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 Xij = number of units shipped from supply point i to
demand point j
i m j n
min  c X
i 1 j 1
ij ij

j n
s.t. Xij  si (i  1,2,..., m)
j 1
i m

X
i 1
ij  dj ( j  1,2,..., n)

Xij  0(i  1,2,..., m; j  1,2,..., n)

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 Balanced Transportation Problem
If Total supply equals to total demand, the
problem is said to be a balanced
transportation problem:

i m j n

s  d
i 1
i
j 1
j

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 Balancing a TP if total supply exceeds total
demand

If total supply exceeds total demand, we

can balance the problem by adding dummy
demand point. Since shipments to the
dummy demand point are not real, they are
assigned a cost of zero.

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 Balancing a transportation problem if total
supply is less than total demand

If a transportation problem has a total

supply that is strictly less than total
demand the problem has no feasible
solution. There is no doubt that in such a
case one or more of the demand will be left
unmet. Generally in such situations a
penalty cost is often associated with unmet
demand and as one can guess this time the
total penalty cost is desired to be minimum
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 7.2 Finding Basic Feasible
Solution for TP
Unlike other Linear Programming
problems, a balanced TP with m supply
points and n demand points is easier to
solve, although it has m + n equality
constraints. The reason for that is, if a set
of decision variables (xij’s) satisfy all but
one constraint, the values for xij’s will
satisfy that remaining constraint
automatically.

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 Methods to find the bfs for a balanced TP

There are three basic methods:

1. Northwest Corner Method

2. Minimum Cost Method

3. Vogel’s Method

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 1. Northwest Corner Method
To find the bfs by the NWC method:
Begin in the upper left (northwest) corner of the
transportation tableau and set x11 as large as
possible (here the limitations for setting x11 to a
larger number, will be the demand of demand
point 1 and the supply of supply point 1. Your
x11 value can not be greater than minimum of
this 2 values).

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 According to the explanations in the previous slide
we can set x11=3 (meaning demand of demand
point 1 is satisfied by supply point 1).
5

3 5 2 3

3 2

X 5 2 3
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 After we check the east and south cells, we saw that
we can go east (meaning supply point 1 still has
capacity to fulfill some demand).
3 2 X

X 3 2 3

3 2 X

3 3

X X 2 3
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 After applying the same procedure, we saw that we
can go south this time (meaning demand point 2
needs more supply by supply point 2).
3 2 X

3 2 1

X X X 3

3 2 X

3 2 1 X

22 X X X 2
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 Finally, we will have the following bfs, which is:
x11=3, x12=2, x22=3, x23=2, x24=1, x34=2

3 2 X

3 2 1 X

2 X

X X X X

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 2. Minimum Cost Method
The Northwest Corner Method dos not utilize shipping
costs. It can yield an initial bfs easily but the total
shipping cost may be very high. The minimum cost
method uses shipping costs in order come up with a
bfs that has a lower cost. To begin the minimum cost
method, first we find the decision variable with the
smallest shipping cost (Xij). Then assign Xij its largest
possible value, which is the minimum of si and dj

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 After that, as in the Northwest Corner Method we
should cross out row i and column j and reduce the
supply or demand of the noncrossed-out row or
column by the value of Xij. Then we will choose the
cell with the minimum cost of shipping from the
cells that do not lie in a crossed-out row or column
and we will repeat the procedure.

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 An example for Minimum Cost Method
Step 1: Select the cell with minimum cost.

2 3 5 6
5

2 1 3 5
10

3 8 4 6
15

12 8 4 6

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 Step 2: Cross-out column 2

2 3 5 6
5

2 1 3 5
2
8

3 8 4 6
15

12 X 4 6

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 Step 3: Find the new cell with minimum shipping
cost and cross-out row 2

2 3 5 6
5

2 1 3 5
X
2 8

3 8 4 6
15

10 X 4 6

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 Step 4: Find the new cell with minimum shipping
cost and cross-out row 1

2 3 5 6
X
5

2 1 3 5
X
2 8

3 8 4 6
15

5 X 4 6

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 Step 5: Find the new cell with minimum shipping
cost and cross-out column 1

2 3 5 6
X
5

2 1 3 5
X
2 8

3 8 4 6
10
5

X X 4 6

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 Step 6: Find the new cell with minimum shipping
cost and cross-out column 3

2 3 5 6
X
5

2 1 3 5
X
2 8

3 8 4 6
6
5 4

X X X 6

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 Step 7: Finally assign 6 to last cell. The bfs is found
as: X11=5, X21=2, X22=8, X31=5, X33=4 and X34=6

2 3 5 6
X
5

2 1 3 5
X
2 8

3 8 4 6
X
5 4 6

X X X X

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 3. Vogel’s Method
Begin with computing a penalty for each row and column.
The penalty will be equal to the difference between the
two smallest shipping costs in the row or column. Identify
the row or column with the largest penalty. Find the first
basic variable which has the smallest shipping cost in that
row or column. Then assign the highest possible value to
that variable, and cross-out the row or column as in the
previous methods. Compute new penalties and use the
same procedure.

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 An example for Vogel’s Method
Step 1: Compute the penalties.

Supply Row Penalty

6 7 8
10 7-6=1

15 80 78
15 78-15=63

Demand 15 5 5

Column Penalty 15-6=9 80-7=73 78-8=70

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 Step 2: Identify the largest penalty and assign the
highest possible value to the variable.

Supply Row Penalty

6 7 8
5 8-6=2
5

15 80 78
15 78-15=63

Demand 15 X 5

Column Penalty 15-6=9 _ 78-8=70

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 Step 3: Identify the largest penalty and assign the
highest possible value to the variable.

Supply Row Penalty

6 7 8
0 _
5 5

15 80 78
15 _

Demand 15 X X

Column Penalty 15-6=9 _ _

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 Step 4: Identify the largest penalty and assign the
highest possible value to the variable.

Supply Row Penalty

6 7 8
X _
0 5 5

15 80 78
15 _

Demand 15 X X

Column Penalty _ _ _

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 Step 5: Finally the bfs is found as X11=0, X12=5,
X13=5, and X21=15

Supply Row Penalty

6 7 8
X _
0 5 5

15 80 78
X _
15

Demand X X X

Column Penalty _ _ _

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 Solve the problems-

D1 D2 D3 D4 Supply

P1 2 3 11 7 6

P2 1 0 6 1 1

P3 5 8 12 9 10
Demand 7 5 3 2

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 Total cost= 116
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 Total cost= 112
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 Total cost= 102
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 Unbalanced problem
A B C Supply

X 4 8 8 76

Y 16 24 16 82

Z 8 16 24 77
Demand 72 102 41

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 Modified Distribution (MODI)/
u-v method/ method of multipliers
• Once an initial solution is obtained, the next step
is to check its optimality in terms of feasibility
of the solution and total minimum cost.
• Calculate the opportunity cost associated with
each unoccupied cell.
• An unoccupied cell with the largest negative
opportunity cost is selected to include in the new
set of transportation routes (allocations).

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• For a given basic feasible solution if we
associate numbers (dual variables/
multipliers) ui and vj with row i (i=1, 2, ..m)
and column j (j= 1, 2, ..n) of the
transportation problem respectively,
then ui and vj must satisfy the equation-

ui + vj = cj for each occupied cell (i, j)

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 7.3 The Transportation Simplex
Method

In this section we will explain how the simplex

algorithm is used to solve a transportation problem.

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 How to Pivot a Transportation Problem

Based on the transportation tableau, the following

steps should be performed.
Step 1. Determine (by a criterion to be developed
shortly, for example northwest corner method) the
variable that should enter the basis.
Step 2. Find the loop (it can be shown that there is
only one loop) involving the entering variable and
some of the basic variables.
Step 3. Counting the cells in the loop, label them as
even cells or odd cells.
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 Step 4. Find the odd cells whose variable assumes the
smallest value. Call this value θ. The variable
corresponding to this odd cell will leave the basis. To
perform the pivot, decrease the value of each odd cell
by θ and increase the value of each even cell by θ. The
variables that are not in the loop remain unchanged.
The pivot is now complete. If θ=0, the entering
variable will equal 0, and an odd variable that has a
current value of 0 will leave the basis. In this case a
degenerate bfs existed before and will result after the
pivot. If more than one odd cell in the loop equals θ,
you may arbitrarily choose one of these odd cells to
leave the basis; again a degenerate bfs will result
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 Illustration of pivoting procedure on the Powerco
example. We want to find the bfs that would result if
X14 were entered into the basis.
5 35 0 35

10 20 20 50
4 3
2 1
10 30 40

45 20 30 30

E O E O E O

(1, 4) (3, 4) (3, 3) (2, 3) (2, 1) (1, 1)

Nothwest Corner bfs and loop for Powerco

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 New bfs after X14 is pivoted into basis. Since There
is no loop involving the cells (1,1), (1,4), (2,1),
(2,2), (3,3) and (3, 4) the new solution is a bfs.

35-20 0+20 35

20-20
10+20 20 50
(nonbasic)

10+20 30-20 40

45 20 30 30

After the pivot the new bfs is X11=15, X14=20,

X21=30, X22=20, X33=30 and X34=10.
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 Two important points!
In the pivoting procedure:

1. Since each row has as many +20s as –20s, the

new solution will satisfy each supply and demand
constraint.

2. By choosing the smallest odd variable (X23) to

leave the basis, we ensured that all variables will
remain nonnegative.

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 Pricing out nonbasic variables

To complete the transportation simplex, now we will

discuss how to row 0 for any bfs. For a bfs in which
the set of basic variables is BV, the coefficient of the
variable Xij (call it čij) in the tableau’s row ) is given
by

čij = cBV B-1aij – cij

Where cij is the objective function coefficient for Xij

and aij is the column for xij in the original LP.
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 Since the example is a minimization problem, the
current bfs will be optimal if all the čij‘s are
nonpositive; otherwise, we enter into the basis with
the most positive čij.
After determining cBVB-1 we can easily determine
čij. Since the first constraint has been dropped,
cBVB-1 will have m+n-1 elements.
cBVB-1= [u2 u3…um v1 v2…vn]
Where u2 u3…um are elements of cBVB-1
corresponding to the m-1 supply constraints, and v1
v2…vn are elements of cBVB-1 corresponding to the n
demand constraints.

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 To determine cBVB-1 we use the fact that in any
tableau, each basic variable Xij must have čij=0.
Thus for each of the m+n-1 variables in BV,

cBV B-1aij – cij=0

For the Northwest corner bfs of Powerco problem,

BV={X11, X21, X22, X23, X33, X34}. Applying the
equation above we obtain:
0 
0 
 
č11= [u2 u3 v1 v2 v3 v4] 1 
 
-8 = v1-8=0
0 
0 
 
55 0 
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 1 
0 
 
1 
č21= [u2 u3 v1 v2 v3 v4]   -9 = u2+v1-9=0
0 
0 
 
0 

1 
0 
 
0 
č22= [u2 u3 v1 v2 v3 v4]   -12 = u2+v2-12=0
1 
0 
 
0 

1 
0 
 
0 
č23= [u2 u3 v1 v2 v3 v4]   -13 = u2+v3-13=0
0 
1 
 
0 
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 0 
1 
 
0 
č33= [u2 u3 v1 v2 v3 v ]
4 0  -16 = u3+v3-16=0
1 
 
0 

0 
1 
 
0 
č34= [u2 u3 v1 v2 v3 v ]
4 0  -5 = u3+v4-5=0
 
1 
 
0 

For each basic variable Xij (except those having i=1), we

see that the equation we used above reduces to ui+vj=cij.
If we define u1=0, we must solve the following system
of m+n equations.
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 u1=0
u1+v1=8
u2+v1=9
u2+v2=12
u2+v3=13
u3+v3=16
u3+v4=5

By solving the system above we obtain:

v1=8, u2=1, v2=11,v3=12, u3=4, v4=1

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 For each nonbasic variable, we now compute
čij = ui+vj – cij

We obtain:
č12 = 0+11 – 6 = 5 č13 = 0+12 – 10 = 2
č14 = 0+1 – 9 = -8 č24 = 1+1 – 7 = -5
č31 = 4+8 – 14 = -2 č32 = 4+11 – 9 = 6

Since č32 is the greatest positive čij, we would next

enter X32 into the basis. Each unit that is entered
into the basis will decrease Powerco’s cost by $6.
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 We have determined that X32 should enter the basis. As
shown in the table below the loop involving X 32 and
some of the basic variables is (3,2), (3,3), (2,3), (2,2).
The odd cells in the loop are (2,2) and (3,3). Since the
smallest value of these two is 10 the pivot is 10.

35 35

10 20 20 50

10 30 40

45 20 30 30

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 The resulting bfs will be:
X11=35, X32=10, X21=10, X22=10, X23=30 and X34=30

The ui’s and vj’s for the new bfs were obtained by
solving
u1=0
u2+v2=12
u3+v4=5
u1+v1=8
u2+v3=13
u2+v1=9
u3+v2=9
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 In computing čij = ui+vj – cij for each nonbasic variable,
we find that č12 = 5, č13 = 2 and č24 = 1 are the only
positive čij‘s. Thus we next enter X12 into the basis. By
applying the same steps we will finally get a solution
where all čij’s are less then or equal to 0, so an optimal
solution has been obtained.

The optimal solution for Powerco is X11=10, X13=25,

X21=45, X23=5, X32=10 and X34=30.
As a result of this solution the objective function value
becomes:
Z=6(10)+10(25)+9(45)+13(5)+9(10)+5(30)=$1020

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 7.4 Sensitivity Analysis
In this section we discuss the following three aspects
of sensitivity analysis for the transportation problem:
1. Changing the objective function coefficient of a
nonbasic variable.
2. Changing the objective function coefficient of a
basic variable.
3. Increasing a single supply by Δ and a single demand
by Δ.

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 1. Changing the objective function coefficient
of a nonbasic variable.
Changing the objective function coefficient of a
nonbasic variable Xij will leave the right hand side of
the optimal tableau unchanged. Thus the current
basis will still be feasible. Since we are not changing
cBVB-1, the ui’s and vj’s remain unchanged. In row 0
only the coefficient of Xij will change. Thus as long
as the coefficient of Xij in the optimal row 0 is
nonpositive, the current basis remains optimal.

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 Let’s try to answer the following question about
Powerco as an example:
For what range of values of the cost of shipping 1
million kwh of electricity from plant 1 to city 1 will the
current basis remain optimal?

Suppose we change c11 from 8 to 8+ Δ.

Now č11 = u1+v1-c11=0+6-(8+ Δ)=2- Δ.

Thus the current basis remains optimal for –2- Δ<=0,

or Δ>=-2, and c11>=8-2=6.
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 2. Changing the objective function coefficient of a
basic variable.
Since we are changing cBVB-1, the coefficient of each
nonbasic variable in row 0 may change, and to determine
whether the current basis remain optimal, we must find
the new ui’s and vj’s and use these values to price out all
nonbasic variables. The current basis remains optimal as
long as all nonbasic variables price out nonpositive.

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 Let’s try to answer the following question about Powerco
as an example:
For what range of values of the cost of shipping 1 million
kwh of electricity from plant 1 to city 3 will the current
basis remain optimal?
Suppose we change c13 from 10 to 10+ Δ.
Now č13=0 changes from u1+v3=10 to u1+v3=10+ Δ.
Thus, to find the ui’s and vj’s we must solve the
following equations:
u1=0 u1+v2=6 u2+v1=9 u2+v3=13
u3+v2=9 u1+v3=10+ Δ u3+v4=5
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 Solving these equations, we obtain u1=0, v2=6, v3=10+ Δ,
v1=6+ Δ , u2=3- Δ, u3=3, and v4=2.
We now price out each nonbasic variable. The current
basis will remain optimal as long as each nonbasic
variable has a nonpositive coefficient in row 0.
č11 = u1+v1-8=Δ-2<=0 for Δ<=2
č14 = u1+v4-9=-7
č22 = u2+v2-12=-3-Δ<=0 for Δ>=-3
č24 = u2+v4-7=-2-Δ<=0 for Δ>=-2
č31 = u3+v1-14=-5+Δ<=0 for Δ<=5
č33 = u3+v3-16=Δ-3<=0 for Δ<=3
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 Thus, the current basis remains optimal for –2<=Δ<=2,
or 8=10-2<=c13<=10+2=12

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 3. Increasing Both Supply si and Demand dj by Δ.
Changing both supply and demand by the same amount
will maintain the balance of the transportation problem.
Since ui’s and vj’s may be thought of as the negative of
each constraint’s shadow price, we know that if the
current basis remains optimal,
New Z value = old Z value+Δui+Δvj

For example if we increase plant 1,s supply and city 2’s

demand by 1 unit, then
New cost=1020+1(0)+1(6)=$1026
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 We can also find the new values of the decision variables
as follows:

1. If Xij is a basic variable in the optimal solution,

increase Xij by Δ.

2. If Xij is a nonbasic variable in the optimal solution,

find the loop involving Xij and some of the basic
variables. Find an odd cell in the loop that is in row I.
Increase the value of this odd cell by Δ and go around the
loop, alternately increasing and then decreasing current
basic variables in the loop by Δ.
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 7.5. Assignment Problems
Example: Machineco has four jobs to be completed.
Each machine must be assigned to complete one job.
The time required to setup each machine for
completingeach job is shown in the table below.
Machinco wants to minimize the total setup time needed
to complete the four jobs.

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 Setup times
(Also called the cost matrix)

Time (Hours)
Job1 Job2 Job3 Job4
Machine 1 14 5 8 7
Machine 2 2 12 6 5
Machine 3 7 8 3 9
Machine 4 2 4 6 10

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 The Model
According to the setup table Machinco’s problem can be
formulated as follows (for i,j=1,2,3,4):
min Z  14 X 11  5 X 12  8 X 13  7 X 14  2 X 21  12 X 22  6 X 23  5 X 24
 7 X 31  8 X 32  3 X 33  9 X 34  2 X 41  X 42  6 X 43  10 X 44
s.t. X 11  X 12  X 13  X 14  1
X 21  X 22  X 23  X 24  1
X 31  X 32  X 33  X 34  1
X 41  X 42  X 43  X 44  1
X 11  X 21  X 31  X 41  1
X 12  X 22  X 32  X 42  1
X 13  X 23  X 33  X 43  1
X 14  X 24  X 34  X 44  1
Xij  0orXij  1
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 For the model on the previous page note that:

Xij=1 if machine i is assigned to meet the demands of

job j

Xij=0 if machine i is assigned to meet the demands of

job j

In general an assignment problem is balanced

transportation problem in which all supplies and
demands are equal to 1.
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 Although the transportation simplex appears to be very
efficient, there is a certain class of transportation
problems, called assignment problems, for which the
transportation simplex is often very inefficient. For that
reason there is an other method called The Hungarian
Method. The steps of The Hungarian Method are as
listed below:
Step1. Find a bfs. Find the minimum element in each row
of the mxm cost matrix. Construct a new matrix by
subtracting from each cost the minimum cost in its row.
For this new matrix, find the minimum cost in each
column. Construct a new matrix (reduced cost matrix) by
subtracting from each cost the minimum cost in its
column.
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 Step2. Draw the minimum number of lines (horizontal
and/or vertical) that are needed to cover all zeros in the
reduced cost matrix. If m lines are required , an optimal
solution is available among the covered zeros in the
matrix. If fewer than m lines are required, proceed to step
3.

Step3. Find the smallest nonzero element (call its value

k) in the reduced cost matrix that is uncovered by the
lines drawn in step 2. Now subtract k from each
uncovered element of the reduced cost matrix and add k
to each element that is covered by two lines. Return to
77step2.
Copyright © 2003 Brooks/Cole, a division of Thomson Learning, Inc.
 7.6 Transshipment Problems
A transportation problem allows only shipments that go
directly from supply points to demand points. In many
situations, shipments are allowed between supply points
or between demand points. Sometimes there may also
be points (called transshipment points) through which
goods can be transshipped on their journey from a
supply point to a demand point. Fortunately, the optimal
solution to a transshipment problem can be found by
solving a transportation problem.

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 The following steps describe how the optimal solution to
a transshipment problem can be found by solving a
transportation problem.
Step1. If necessary, add a dummy demand point (with a
supply of 0 and a demand equal to the problem’s excess
supply) to balance the problem. Shipments to the dummy
and from a point to itself will be zero. Let s= total
available supply.
Step2. Construct a transportation tableau as follows: A
row in the tableau will be needed for each supply point
and transshipment point, and a column will be needed for
each demand point and transshipment point.
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 Each supply point will have a supply equal to it’s
original supply, and each demand point will have a
demand to its original demand. Let s= total available
supply. Then each transshipment point will have a supply
equal to (point’s original supply)+s and a demand equal
to (point’s original demand)+s. This ensures that any
transshipment point that is a net supplier will have a net
outflow equal to point’s original supply and a net
demander will have a net inflow equal to point’s original
demand. Although we don’t know how much will be
shipped through each transshipment point, we can be
sure that the total amount will not exceed s.
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