TRANSPORTATION MODEL

The transportation model deals with a special class of linear programming problem in
which the objective is to transport a homogeneous commodity from various
sources/origins or factories to different destinations or markets subject to the supply and
demand of the sources and destination such that the total cost of transportation is
minimized.
This means that a transportation model has the properties of a linear programming
problem.
There are two types of transport problems:
Balanced T.P S=D
Unbalanced T.P S≠ D in this case, a dummy column or row is introduced.
Comparison between transportation model and general linear Programming model
Similarities
1. Both have objective function.
2. Both have linear objective function.
3. Both have non - negativity constraints.
4. Both can be solved by simplex method. In transportation model it is laborious.

Differences
1. Transportation model is basically a minimization model; where as general linear
programming model may be of maximization type or minimization type.
2. The resources, for which, the structural constraints are built up is homogeneous
in transportation model; where as in general linear programming model they are
different. That is one of the constraint may relate to machine hours and next one may
relate to man-hours etc. In transportation problem, all the constraints are related to one
particular resource or commodity, which is manufactured by the factories and
demanded by the market points.
3. The transportation problem is solved by transportation algorithm; whereas the general
linear programming problem is solved by simplex method.
4. The values of structural coefficients (i.e. x ij) are not restricted to any value in general
linear programming model, where as it is restricted to values either 0 or 1 in
transportation problem.

Solving a transport problem

Steps used in getting a solution to a transportation problem are given below:
Initial Basic Feasible Solution
Step 1. Balancing the given problem.
Balancing means check whether sum of availability constraints (Σ bi) equals to
sum of requirement constraints (Σ dj). That is Σ bi = Σ dj. Once they are equal, go
to step two. If not, open a Dummy row or Dummy column to balance the
problem. The cost coefficients of dummy cells are zero.
If Σ bi is greater than Σ dj, then open a dummy column, whose requirement
constraint is equals to Σ bi - Σ dj and the cost coefficient of the cells are zeros. In
case if Σ dj is greater than Σ bi, then open a dummy row, whose availability
constraint will be equals to Σ dj – Σ bi and the cost coefficient of the cells are
zeros. Once the balancing is over, then go to second step.
Step II. Basic feasible solution can be obtained by three method:
i. North - west corner method.
ii. Least - cost cell method. (Or Inspection method Or Matrix minimum - row
minimum - column minimum method)
iii. Vogel's Approximation Method, generally known as VAM.
After getting the basic feasible solution (b.f.s.) give optimality test to check whether the
solution is optimal or not.
There are two methods of giving optimality test:
i. Stepping Stone Method.
ii. Modified Distribution Method, generally known as MODI method.
Properties of a Basic feasible Solution
The allocation made must satisfy availability constraints and requirement constraints.
It should satisfy non negativity constraint.
Total number of allocations must be equal to (m + n – 1), where 'm' is the number of rows
and 'n' is the number of columns. Consider a value of m = 4 and n = 3, i.e. 4 × 3 matrix.
This will have four constraints of ≤ type and three constraints of ≥ type. Totally it will
have 4 + 3 (i.e. m + n) inequalities. If there are 'm' rows and 'n' columns, in a given
transportation problem, we can state the problem completely with m + n – 1 equations.

North - West corner Method

Example:
Four factories, A, B, C and D produce sugar and the capacity of each factory is given
below: Factory A produces 10 tons of sugar and B produces 8 tons of sugar, C produces 5
tons of sugar and that of D is 6 tons of sugar. The sugar has demand in three markets X, Y
and Z. The demand of market X is 7 tons, that of market Y is 12 tons and the demand of
market Z is 5 tons. The following matrix gives the transportation cost of 1 ton of sugar
from each factory to the destinations. Find the optimal Solution for least cost
transportation cost.

Factories. Cost in Ksh. Per ton (× 1000) Availability in tons.

Markets
X Y Z
A 4 3 2 10
B 5 6 1 8
C 6 4 3 5
D 3 5 4 6
Requirement in tons 7 12 5 Σ b = 29, Σ d = 24

Here Σ b is greater than Σ d hence we have to open a dummy column whose requirement
constraint is 6, so that total of availability will be equal to the total demand.
 (i) Balance the problem. That is see whether Σ bi = Σ dj. If not open a dummy column or
dummy row as the case may be and balance the problem.
(ii) Start from the left hand side top cell and make allocations depending on the availability
and requirement constraint. If the availability constraint is less than the requirement
constraint, then for that cell make allocation in units which is equal to the availability
constraint.
In general, verify which is the smallest among the availability and requirement and
allocate the smallest one to the cell under question. Then proceed allocating either
sidewise or downward to satisfy the rim requirement. Continue this until all the allocations
are over.
(iii) Once all the allocations are over, i.e., availability and requirement constraints are
satisfied, write allocations and calculate the cost of transportation.

Summary:
 Start the procedure with the northwest corner cell
 Allocate least value by comparing availability (supply) and requirement (demand).
 The least value is allocated to the N.W.C cell; subtract the value from both
availability and requirement and cancel out either the row or column with 0 value
for either the availability or requirement. In this case, the column will be cancelled
out.
 Check for the next N.W.C cell again and repeat the process.
For cell AX the availability constraint is 10 and the requirement constraint is 7. Hence 7 is
smaller than 10, allocate 7 to cell AX. Next 10 – 7 = 3, this is allocated to cell AY to
satisfy availability requirement. Proceed in the same way to complete the allocations.
Then count the allocations, if it is equals to m + n – 1, then the solution is basic feasible
solution. The solution, we got have 7 allocations which is = 4 + 4 – 1 = 7. Hence the
solution is basic feasible solution.

The allocations made are:

From To Units in tons Cost on Ksh. (× 1000)
A X 7 7 × 4 = 28
A Y 3 3 × 3 = 09
B Y 8 8 × 6 = 48
C Y 1 1 × 4 = 04
C Z 4 4 × 3 = 12
D Z 1 1 × 4 = 04
D DUMMY 5 5 × 0 = 00
Total in Ksh. (× 1000) 105
 Solution by Least cost cell (or inspection) Method: (Matrix Minimum method)
(i) Identify the lowest cost cell in the given matrix. In this particular example it is = 0. Four
cells of dummy column are having zero. When more than one cell has the same cost,
then both the cells are competing for allocation. This situation in transportation
problem is known as tie. To break the tie, select any one cell of your choice for
allocation. Make allocations to this cell either to satisfy availability constraint or
requirement constraint. Once one of these is satisfied, then mark crosses (×) in all the
cells in the row or column which ever has completely allocated. Next search for
lowest cost cell. In the given problem it is cell BZ which is having cost of Ksh. 1/-
Make allocations for this cell in similar manner and mark crosses to the cells in row
or column which has allocated completely. Proceed this way until all allocations are
made. Then write allocations and find the cost of transportation. As the total number
of allocations are 7 which is equals to 4 + 4 – 1 = 7, the solution is basic feasible
solution.

Summary:
 Find the minimum value in the cost matrix.
 If more than one value has the least value, select randomly any of them and
begin with it.
 Allocate least value by comparing availability and demand. Subtract the value
from both availability and requirement then cancel out either the row or
column with value 0; in this case we cancel out the column.
 Select the next least value from the remaining cell.
 (Note: The numbers under and side of rim requirements shows the sequence of allocation
and the units remaining after allocation)
Allocation made:
From To Units in tons Cost in Ksh.
A Y 8 8 × 3 = 24
A Z 2 2 × 2 = 04
B Z 3 3 × 1 = 03
B DUMMY 5 5 × 0 = 00
C X 1 1 × 6 = 06
C Y 4 4 × 4 = 16
D X 6 6 × 3 = 18
Total in Ksh. 71

In the problem given, the total cost of transportation for Northwest corner method is Ksh.
101/-. The total cost of transportation for Least Cost cell method is Ksh. 71/-

Solution by Vogel’s Approximation Method: (Opportunity cost method)

i. In this method, we use the concept of opportunity cost.
Opportunity cost is the penalty for not taking the correct decision. To find the row
opportunity cost in the given matrix deduct the smallest element in the row from the next
 highest element. Similarly to calculate the column opportunity cost, deduct smallest
element in the column from the next highest element. Write row opportunity costs of
each row just by the side of availability constraint and similarly write the column
opportunity cost of each column just below the requirement constraints. These are known
as penalty column and penalty row.
This is the penalty for not taking correct decision and hence the opportunity cost. This is
the lowest opportunity cost in that particular row or column as we are deducting the
smallest element from the next highest element. If the row has two elements of the same
magnitude as the smallest element then the opportunity cost of that row or column is zero.
ii. Write row opportunity costs and column opportunity costs as described above.
iii. Identify the highest opportunity cost among all the opportunity costs and write a tick (√ )
mark at that element.
iv. If there are two or more of the opportunity costs which of same magnitude, then select
anyone of them, to break the tie.

Summary:
 Find out row difference and column difference; done by selecting the least cost
value and subtract it from the next least cost value
 Select the maximum value among the row difference and column difference;
 Identify the cell for allocation which has least cost in that row or column;
 Allocate the least value by comparing demand and supply.
 Add products of all allocated cells.
In the first row of the matrix, the lowest cost element is 0, for the cell A-Dummy and next
highest element is 2, for the cell AZ. The difference is 2 – 0 = 2. The meaning of this is, if
we transport the load through the cell A-Dummy, whose cost element is 0, the cost of
transportation will be = Ksh.0/- for each unit transported. Instead, if we transport the load
through the cell, AZ whose cost element is Ksh. 2/- the transportation cost is = Ksh.2/- for
each unit we transport. This means to say if we take decision to send the goods through
the cell AZ, whose cost element is Ksh.2/- then the management is going to lose Ksh. 2/-
for every unit it transport through AZ. Suppose, if the management decide to send load
through the cell AX, Whose cost element is Rs.4/-, then the penalty or the opportunity cost
is Ksh.4/-. We write the minimum opportunity cost of the row outside the matrix. Here it
is shown in brackets. Similarly, we find the column opportunity costs for each column and
write at the bottom of each corresponding row (in brackets). After writing all the
opportunity costs, then we select the highest among them. In the given matrix it is Ksh.3/-
for the rows D and C. This situation is known as tie. When tie exists, select any of the
rows of your choice. At present, let us select the row D. Now in that row select the lowest
cost cell for allocation. This is because; our objective is to minimize the transportation
cost. For the problem, it is D-dummy, whose cost is zero. For this cell examine what is
available and what is required? Availability is 6 tons and requirement is 5 tons. Hence
allocate 5 tons to this cell and cancel the dummy row from the problem. Now the matrix is
reduced to 3 × 4. Continue the above procedure and for every allocation the matrix goes
on reducing, finally we get all allocations are over. Once the allocations are over, count
them, if there are m + n – 1 allocations, then the solution is basic feasible solution.
From To Load Cost in Ksh.
A X 3 3 × 4 = 12
A Y 7 7 × 3 = 21
B X 3 3 × 5 = 15
B Z 5 5 × 1 = 05
C Y 5 5 × 4 = 20
D X 1 1 × 3 = 03
D DUMMY 5 5 × 0 = 00
Total Ksh. 76

Optimality Test
Once, we get the basic feasible solution for a transportation problem, the next duty is to
test whether the solution got is an optimal one or not. Optimality test process done using
stepping stone method or Modified Distribution Method (MODI).
Stepping stone method of optimality test
To give an optimality test to the solution obtained, we have to find the opportunity cost of
empty cells. As the transportation problem involves decision making under certainty, we
know that an optimal solution must not incur any positive opportunity cost. Thus, we have
to determine whether any positive opportunity cost is associated with any empty cells.
Once the opportunity cost of all empty cells are negative, the solution is said to be
optimal. In case any cell has got positive opportunity cost, then the solution is to be
modified. Every empty cell is to be evaluated for its opportunity cost. To do this the
methodology is:
1. Put a small ‘+’ mark in the empty cell.
2. Starting from that cell draw a loop moving horizontally and vertically from loaded cell
to loaded cell. Remember, there should not be any diagonal movement. We have to
 take turn only at loaded cells and move to vertically downward or upward or
horizontally to reach another loaded cell. In between, if we have a loaded cell, where
we cannot take a turn, ignore that and proceed to next loaded cell in that row or
column.
3. After completing the loop, mark minus (–) and plus (+) signs alternatively.
4. Identify the lowest load in the cells marked with negative sign.
5. This number is to be added to the cells where plus sign is marked and subtract from
the load of the cell where negative sign is marked.
6. Do not alter the loaded cells, which are not in the loop.
7. The process of adding and subtracting at each turn or corner is necessary to see that
rim requirements are satisfied.
8. Construct a table of empty cells and work out the cost change for a shift of load from
loaded cell to loaded cell.
9. If the cost change is positive, it means that if we include the evaluated cell in the
programme, the cost will increase. If the cost change is negative, the total cost will
decrease, by including the evaluated cell in the programme.
10. The negative of cost change is the opportunity cost. Hence, in the optimal solution of
transportation problem empty cells should not have positive opportunity cost.
11. Once all the empty cells have negative opportunity cost, the solution is said to be
optimal.
Basic Feasible Solution obtained by VAM:
Table 1:
S. Empty Cell Evaluation loop formation Cost change in Ksh. Opportunity cost
No. -(Cost change)
1 AZ +AZ – AX + BX – BZ +2 – 4 + 5 – 1 = + 2 -2
2 A Dummy + A DUMMY – AX + BX – B DUMMY +0 – 4 + 3 – 0 = – 1 +1
3 BY + BY – AY + AX – BX +6 – 3 + 4 – 5 = +2 -2
4 B DUMMY + B DUMMY – BX + DX – D DUMMY +0 – 5 +3 – 0 = –2 +2
5 CX +CX – CY + AX – AY 6 – 4 + 3 – 4 = +1 -1
6 CZ +CZ – BZ + BX –AX + AY – CY +2 –1 +5 – 4 +5 – 4 =+1 -1
7 CDUMMY + C DUMMY – D DUMMY + DX –AX + 0 – 0 +3 – 4 +3 – 4 = -2 +2
+ AY – CY
8 DY +DY – DX + AX – AY +5 – 3 +4 – 3 = +3 -3
9 DZ +DZ – DX +BX – BZ +4 – 3 + 5 – 1 = +5 -5

In the table 1 cells A DUMMY, B DUMMY, C DUMMY are the cells which are having positive
opportunity cost. Between these two cells B DUMMY and C DUMMY are the cells, which are
having higher opportunity cost i.e. Ksh. 2/ - each. Let us select any one of them to include in the
improvement of the present programme. Let us select C DUMMY.

Table 2:
S. Empty Evaluation loop formation Cost change in Ksh. Opportunity cost
No. Cell -(Cost change)
1 AX +AX –DX + D DUMMY – C DUMMY+ +4–3+0–0+4–3=+2 -2
CY – AY
2 AZ AZ – AY + CY – C DUMMY +D + 2 – 3 + 4 – 0 + 0 – 3 +3 – 0 = -4
DUMMY – DX+ BX – BZ +4
3 A + A DUMMY – AY + DX –D DUMMY +0–4+3–0=–1 +1
DUMMY
4 BY +BY – BX + DX – D DUMMY +C + 6 –5 + 3 –0 + 0 – 4 = 0 0
DUMMY – CY
5 B + B DUMMY – BX + DX – D DUMMY + 0 – 5 + 3 – 0 = –2 +2
DUMMY
6 CX + CX – DX + D DUMMY – C DUMMY + 6 –3 + 0 – 0 = +3 -3
7 CZ + CZ – C DUMMY + D DUMMY– DX +2–0+0–3+5–1=+3 -3
+ BX – BZ
8 DY DY – CY + C DUMMY – D DUMMY +5–4+0–0=1 -1
9 DZ + DZ – DX + BX – BZ + 4 – 3 +5 – 1 = + 5 -5

Cells A DUMMY and B DUMMY are having positive opportunity costs. The cell B DUMMY is
having higher opportunity cost. Hence let us include this cell in the next programme to improve
the solution.
 Table 3
S. Empty Evaluation loop formation Cost change in Ksh. Opportunity cost
No. Cell -(Cost change)
1 AX +AX – AY + CY – C DUMMY +B +4 – 3 + 4 – 0 + 0 – 5 = 0 0
DUMMY – BX
2 AZ + AZ – BZ + B DUMMY – C DUMMY+ +2 –1 + 0 – 0 + 4 – 3 =+ 2 -2
CX – AX
3 A + A DUMMY – C DUMMY + CY – AY +0 – 0 + 4 – 3 = +1 -1
DUMMY
4 BY + BY – B DUMMY + C DUMMY – CY +6 – 0 + 0 – 4 = + 2 -2
5 CX + CX – BX + B DUMMY – C DUMMY +6 – 5 + 0 – 0 = +1 -1
6 CZ + CZ – BZ + B DUMMY – C DUMMY +2 – 1 + 0 – 0 = +1 -1
7 DY +DY – CY + C DUMMY – B DUMMY+ +5 – 4 + 0 – 0 + 5 – 3 = +3 -3
BX – DX
8 DZ + DZ – BZ + BX – DX +4 – 1 + 5 – 3 = +5 -5
9 D + D DUMMY – DX + BX – B DUMMY + 0 – 3 + 5 – 0 = +2 -2
DUMMY

All the empty cells have negative opportunity cost hence the solution is optimal. The allocations
are:

S. No. Loaded cell Load Cost in Ksh.

1 AY 10 10 × 3 = 30
2 BX 01 01 × 5 = 05
3 BZ 05 05 × 1 = 05
4 B DUMMY 02 02 × 0 = 00
5 CY 02 02 × 4 = 08
6 C DUMMY 03 03 × 0 = 00
7 DX 06 06 × 3 = 18
Total in Ksh. 66

Total minimum transportation cost is Ksh. 66/-

Optimal allocation: