UNIVERSITY OF NAIROBI

DEPARTMENT OF AGRICULTURAL ECONOMICS

Topic 3.1: Transportation Problems

3.1.1 Introduction
3.1.2 Objectives.
3.1.3 An overview of past lectures
3.1.4 The formulation and solution of a transportation problem
3.1.5 General LP model of the transportation problem
3.1.6 Activity
3.1.7 Suggestions for further reading
3.1.1 Introduction
Transportation problems belong to a special class of Linear Programming problems called
network flow problems.
Other common network flow problems include assignment and transshipment problems.

The distinction between them is of no consequence at this level because if a learner understands
and can model one type then he/she should be able to model all the others. We will define the
three but confine our illustration and discussion to Transportation problems only.

Transportation problem: this often involves minimizing the cost of transporting goods from a
set of origins to a set of destinations.
For instance, New KCC has eight major milk processing factories, and consumers are
everywhere in the country and beyond. How much milk should be transported from each of these
factories to each of the major towns in the country? Think about how you would make the
decision if you were a manager in New KCC.
What variables would you consider? Please note your answer here, which you should confirm or
dismiss after the learning.

Assignment problem: the assignment of agents or persons to tasks, assigning jobs to machines,
assigning sales personnel to sales territories, assigning contracts to bidders, among others. One
needs to come up with a set of assignments that will optimize a stated objective. For instance,
under certain constraints, sales costs may be minimized by sending Otieno to Kapenguria and
Kitale and Kyalo to Bomet and Migori, as sales assistants.

Transshipment problem: this is an extension of the transportation problem to distribution

problems involving transfer points and possible transportation between any pair of foci. For
instance, transporting vegetables from Kinangop and from Njoro to two warehouses in Nakuru,
to distribute to various markets in the Country, with the minimum possible transportation cost.

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3.1.2 Objectives

At the end of this topic you should be able to:

(i) Explain the concepts of transportation, assignment and
transshipment problems, with a mention of relevant
objectives in each case.
(ii) Outline the steps involved in solving transportation problems
(iii) Formulate and solve (computer solution), a typical
transportation problem
(iv) Construct a general LP model of a transportation problem

3.1.3 An overview of past lectures

You have now commenced the third of the three chapters prescribed in the course outline.

Chapter One was introductory, and covered the course objectives, various definitions, origins
and nature of OR, Problem solving and decision making, the quantitative analysis process, and
finally OR in practice and the role of OR in decision making

Chapter Two presented an introduction to Linear Programming (LP). It should be noted that LP
is not synonymous with OR, but is just one of the tools used in quantitative analysis in a decision
making process. LP is an OR tool, but OR is not always LP. However, a learner who follows and
understands LP will manage many other tools of OR. In the chapter we covered graphical
solutions, computer solutions and algebraic (Simplex) solutions. We discussed Sensitivity
Analysis (SA) in all the solution approaches. SA is always important in decision making,
especially in agriculture and agribusiness where systems are relatively more risky and are
generally dynamic. Once you make a decision based on certain parameters, what if at least one
of the parameters changes? If you decide to grow and sell beans based on a projected profit of sh
100 per kg., what if the neighbouring countries flood our market and dampen the actual profit?
Take note that “What if” is the essence of SA, and can be applied in any decision making
process, even outside LP.

Chapter Three now is on selected common applications of Operations Research. We shall

tackle the first three (Transportation problems, Inventory Models, and Queuing Theory) here
while the last four will only be mentioned as they have also been in other courses of UoN BSc
Agribusiness Management.

The Lecture 3.1 will require that you recall how to formulate and solve linear programming
problems
3.1.4 The formulation and solution of a transportation problem
The transportation problem arises frequently in planning for the distribution of goods and
services from several supply locations (origins) to several demand locations (destinations). The
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objective of a transportation problem is to minimize the cost of transporting goods from the
origins to the destinations. (Caution: watch out for a different objective, for instance
maximization of profit that will be dependent on the set of routes taken).

Let us consider the transportation problem faced by Mboga Transporters Limited, involved in the
transportation of assorted Asian vegetables from three growing areas (Molo, Kibwezi and
Kinangop).

Production capacities for the three areas over the next one month planning period for the
vegetable assortment are as follows:

Origin Farmland One-month production

capacity (kgs)
1 Molo 5000
2 Kibwezi 6000
3 Kinangop 2500
13500

Mboga Transporters Ltd distributes the vegetables to urban markets in four towns, Kisumu,
Nakuru, Mombasa and Nairobi. The one-month forecast of the demand for the distribution
centres is as follows:

Destination Distribution One-month demand

centre forecast (kgs)
1 Kisumu 6000
2 Nakuru 4000
3 Mombasa 2000
4 Nairobi 1500
13500

Take note of an unusual phenomenon here, where demand = supply; in reality often this is not
the case. Many times Demand>supply and a few times Demand <supply.

The vegetable producers would like to determine how much should be transported from
each farmland to each market
The objective is to determine the routes to be used and the quantities to be transported via each
route that will provide the minimum total transportation cost associated with meeting all
distribution centre demands.

As an illustration: Question - will all the 6000kg demand in Kisumu come from just one
farmland or from a combination of two or more? Think about it! What should guide this? Which
variables should guide the decision process?
Clue: transport of goods is normally charged on distance and quantity (weight or volume)

For Mboga Ltd., the cost in Kshs. of each kg transported on each route is given below:

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 Destination
Origin
Kisumu Nakuru Mombasa Nairobi
Molo 3 2 7 6
Kibwezi 7 5 2 3
Kinangop 2 5 4 5

How do we read the table? In case someone is challenged here

Transporting 1kg from Molo to Kisumu will be charged sh 3. Now try the others

How do we solve?
 Prepare a graphical representation called a network of the problem
 Formulate an LP model of the problem
 Solve using any optimization computer software (we will use Lindo)

Network of the Mboga Ltd problem

Please study and try to understand the network presented in the following page, against the three
tables given, before you get the explanations that follow of the same.

Please try doing the network where we stopped in class before you read further, then compare
with what is presented below.
The network diagram has errors in two places, please see if you can identify the errors

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The circles are referred to as nodes, representing each origin and each destination
The lines connecting the nodes are arcs, representing each possible transportation route

The amount of the supply is written next to each origin node

The amount of the demand is written next to each destination node

The vegetables transported from the origins to the destinations represent the flow in the network;
direction of flow is indicated by arrows

The network is complete; we now move to the next step of formulating an LP model

Linear programming model of the Mboga Ltd problem

Use double subscripted decision variables:

 x11 represents quantity transported from origin 1 to destination 1; in this case from Molo
to Kisumu
 x12 represents quantity transported from origin 1 to destination 2; in this case from Molo
to Nakuru
 xij represents quantity transported from origin i to destination j

In general, the decision variables for a transportation problem having m origins and n
destinations are written as xij
 xij is the number of units or the quantity transported from origin i to destination j, where
i= 1, 2, …, m and j = 1, 2, …, n

Take note: there is one decision variable for each arc. If we find that x24=500, it means
transporting 500 units from origin 2 (Kibwezi) to destination 4 (Nairobi)

Question (try to think and answer before you move forward):

 How much does it cost to transport one kilogram of the vegetables from Molo to
Kisumu? Where have you obtained the answer?
 How many kilograms will be transported from Molo to Kisumu? Write the respective
decision variable here since we have not yet solved the problem
 How much then will it cost to transport the whole consignment that will be transported
from Molo to Kisumu?

The answers to the three bullets are 3, x11, and 3x11 respectively. If you managed to solve before
reaching here then you are doing well.

Remember, we should be formulating an LP model. We had learnt much earlier that an LP

model must have an objective function and several constraints, including non-negativity
constraints.

The objective function here is minimizing total transportation cost; now let us define total
transportation costs from each origin

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Transportation costs for units from Molo: 3x11 + 2x12 + 7x13 + 6x14

Are you able to do the ones from Kibwezi and from Kinangop? Try then compare with this:

Transportation costs for units from Kibwezi: 7x21 + 5x22 + 2x23 + 3x24
Transportation costs for units from Kinangop: 2x31 + 5x32 + 4x33 + 5x34

Now write the objective function:

Min 3x11 + 2x12 + 7x13 + 6x14 + 7x21 + 5x22 + 2x23 + 3x24 + 2x31 + 5x32 + 4x33 + 5x34

Constraints: please read the bullets very carefully

 Each origin has limited supply; this means the total transportation from each node
(origin) must be less than or equal to the respective stated supply
 Each destination has specific demand; this means the total transportation to each node
(destination) must be equal to the respective stated demand

Consider supply constraints first:

Molo: x11 + x12 + x13 + x14 ≤ 5000

Take note that here the decision variables do not have coefficients.
What were there coefficients of the decision variables in the objective function?
Why don’t we have them here?
If you can answer these then you are doing very well.
Now write the supply constraints for Kibwezi and Kinangop

Kibwezi: x21 + x22 + x23 + x24 ≤ 6000

Kinangop: x31 + x32 + x33 + x34 ≤ 2500

Now consider demand constraints:

Kisumu: x11 + x21 + x31 = 6000

Observe, here we have equality (=), not inequality (≤) constraint. Why?
I had asked you to read carefully the two bullets above.
Now write the demand constraints for Nakuru, Mombasa and Nairobi

Nakuru: x12 + x22 + x32 = 4000

Mombasa: x13 + x23 + x33 = 2000
Nairobi: x14 + x24 + x34 = 1500

Now we have all the parts of the LP model we were building. We should now put the parts
together to make the model:

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Min 3x11 + 2x12 + 7x13 + 6x14 + 7x21 + 5x22 + 2x23 + 3x24 + 2x31 + 5x32 + 4x33 + 5x34
St x11 + x12 + x13 + x14 ≤ 5000
x21 + x22 + x23 + x24 ≤ 6000
x31 + x32 + x33 + x34 ≤ 2500
x11 + x21 + x31 = 6000
x12 + x22 + x32 = 4000
x13 + x23 + x33 = 2000
x14 + x24 + x34 = 1500
xij ≥ 0, for i = 1, 2, 3 and j = 1, 2, 3, 4

The LP model is complete. The presentation here where I have made a specific column for each
decision variable is desirable if the solution will be done through Simplex procedure. The
arrangement, however, is not necessary when using computer solution.

Observe:
 All the information needed in the LP is in the network
 There is one constraint for each node
 There is one variable for each arc
 The sum of variables from an origin is less than or equal to the supply; you supply only
what you have or less
 The sum of variables to a destination is equal to the demand; demand is specific

Computer solution
Now apply what we learnt in class to get the computer solution
I will share here the solution and its interpretation. I will, however, not discuss the Sensitivity
Analysis. Please try it first before checking what is presented here

Objective function value 39500.000000

Variable Value Reduced

costs
x11 3500 0
x12 1500 0
x13 0 8
x14 0 6
x21 0 1
x22 2500 0
x23 2000 0
x24 1500 0
x31 2500 0
x32 0 4
x33 0 6
x34 0 6

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We will skip slack/surplus because there is none (but there are dual prices! What do they
represent?) We skip sensitivity analysis also for now, but you may just explore it as you revise
on your own. Let us now interpret the solution
Question: what is the meaning of value of a variable? How about reduced costs? Refer to your
notes on LP

Interpretation of the computer solution

Do the entries below make sense to you? They have been lifted from the computer printout, but
the decision variables whose values are zero were left out

Route Units Total

From To (Kgs) @ cost
Molo Kisumu 3500 3 10500
Molo Nakuru 1500 2 3000
Kibwezi Nakuru 2500 5 12500
Kibwezi Mombasa 2000 2 4000
Kibwezi Nairobi 1500 3 4500
Kinangop Kisumu 2500 2 5000
Value of objective function 39500

Problem variations
The case we have discussed is fairly general, with total supply being equal to total demand.
There are, however, possible variations which include the following:
(i) Total supply ≠ total demand (total supply not equal to total demand)
(ii) Maximization objective function rather than minimization
(iii) Route capacities or route minimums
(iv) Unacceptable routes

Solving problems with the respective variations may be easily accommodated with slight
modifications

Total supply ≠ total demand

If Total supply > Total demand then no modification of formulation is necessary. Excess
supply will appear as slack in the LP solution.
Slack for any particular origin is interpreted as the unused supply or amount not transported from
the origin.

If Total supply < Total demand, it will be infeasible.

Here it is desirable to provide a minimum cost transportation schedule for the available supply,
and also indicate which destinations will have unsatisfied demand.
How is this achieved?
Modify the network representation by adding a dummy origin with a supply equal to the
difference between total demand and total supply. With the addition of a dummy origin and an
arc to each destination, the LP model would have a feasible solution.

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Suppose in the Mboga Ltd problem Kibwezi could supply only 5000kgs instead of 6000, there
would be a shortfall of 1000. In the respective network, a fourth node would be added and named
dummy, with arrows to each of the four demand locations. A zero per unit cost is assigned to
each arc leaving the dummy origin.
The value of the optimal solution will represent the transportation cost for the units actually
transported (there will be NO transportations from the dummy)
The destinations showing transportations being received from the dummy will be experiencing
shortfalls or unsatisfied demand

Maximization rather than minimization in transportation

The objective may be to find a solution that maximizes profit or revenue
Using profit or revenue per unit values as coefficients in the objective function, solve for a
maximization rather than minimization LP.
The constraints are not affected here.

Route capacities or route minimums

Suppose Kinangop-Kisumu was found to have a capacity of 1000kgs because of limited space
availability in its normal mode of transportation, x31 would have to be less than or equal to 1000.
Accommodate the route capacity by adding a constraint in the LP model that provides for an
upper limit on the corresponding decision variable (x31≤1000)
Route minimums can also be specified, for instance x22≥2000 means Kibwezi-Nakuru would
guarantee delivery of 2000 units maintained in the optimal solution.

Some routes are unacceptable

Action: Simply drop the corresponding arc from the network, and remove the respective variable
from the LP formulation. For instance, if Mombasa people will not take any quantity of
vegetables from Molo, then simply remove x13 from the LP formulation. You will remain with 11
variables and 7 constraints, but guarantees the route Molo-Mombasa is not used.
3.1.5 General LP model of the transportation problem

Subject to:
; i=1, 2, …, m: supply

; j = 1, 2, …, n: demand

Where,i = index of origins from 1 to m

j = index of destinations from 1 to n
Xij = number of units transported from I to j
Cij = cost per unit of transporting from I to j
Si = supply capacity in units at origin i
Dj = demand in units at destination j
If there is a capacity constraint then add, Xij ≤ L or Xij ≥ K
3.1.6 Activity

A product is produced at three plants and transported to three warehouses.

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 The transport costs per unit are shown in the table below
Warehouse Plant
Plant W1 W2 W3 capacity
P1 20 16 24 300
P2 10 10 8 500
P3 12 18 10 100
Warehouse 200 400 300
demand
a) Show a network representation of the problem
b) Develop an LP model for minimizing transportation costs; solve
the model to determine the minimum cost solution
c) Suppose the entries in the table above represent profit per unit from
producing at plant i and selling to warehouse j. How does the
model formulation change from that in part b?
d) Suppose the plant capacity at P2 is 300 but all the other entries are
unchanged. Show the network representation of the problem.

3.1.7 Suggestions for further reading

Anderson D. R., J. D. Sweeney and T. A. Williams (2019)

An Introduction to Management science: Quantitative
Approaches to Decision Making. West Publishing Company
Ltd., New York. 15th Edition

Shah N.H., R.M. Gor and H. Soni (2010)

Operations Research
Eastern Economy Edition

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