Linear Programming

UNIT 7 LINEAR PROGRAMMING and Transportation

Problem

AND TRANSPORTATION
NOTES
PROBLEM
Structure
7.0 Introduction
7.1 Objectives
7.2 Linear Programming Formulation of Transportation Problems
7.3 Existence of Solution of Transportation Problems
7.4 Solution of a Transportation Problem
7.4.1 Transhipment Model
7.5 Feasible Solution (NWCM - LCM - VAM)
7.6 Answers to Check Your Progress Questions
7.7 Summary
7.8 Key Words
7.9 Self Assessment Questions and Exercises
7.10 Further Readings

7.0 INTRODUCTION

Linear Programming (LP, also called linear optimization) is a method to achieve

the best outcome (such as, maximum profit or lowest cost) in a mathematical
model whose requirements are represented by linear relationships. Linear
programming is a special case of mathematical programming (also known
as mathematical optimization). The transportation problem as it is stated in modern
or more technical literature looks somewhat different because of the development
of Riemannian geometry and measure theory. The mines-factories example, simple
as it is, is a useful reference point when thinking of the abstract case. In this setting,
we allow the possibility that we may not wish to keep all mines and factories open
for business, and allow mines to supply more than one factory, and factories to
accept iron from more than one mine.
There are numerous categories of Linear Programming (LP) models that
exhibit an exceptional and unique structure that helps in the formulation of efficient
algorithms for finding their solutions. These structures helped to solve larger
problems which otherwise would not have been possible to solve using the existing
technology. Traditionally, the first or initial of these special and unique structures
that were typically analysed is termed as the Transportation Problem (TP) are
considered as a particular type of network problem. Principally, it provided an
efficient solution to the problem to be solved and was considered as the initial
most widespread application of Linear Programming Problems (LPP) that were
typically used for the industrial logistics.
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Linear Programming Fundamentally, the Transportation Problem (TP) is usually concerned with
and Transportation
Problem the distribution of a certain commodity/product from several origins/sources to
several destinations with minimum total cost through single mode of transportation.
A necessary and sufficient condition for the existence of a feasible solution to a
NOTES transportation problem is that the transportation problem must be balanced. A
Balanced Transportation Problem (BTP) is a transportation problem in which the
total supply is equivalent to the total demand.
In the transportation problems, the term ‘Loop’ or ‘Path’ is defined as an
ordered sequence of at least four different cells that satisfy all the concerned
conditions.
In this unit, you will study about the linear programming formulation of
transportation problem, loops in the transportation problems, finding an initial base
in the transportation problems, existence of solution of transportation problems,
transhipment problem, and feasible solution (NWCM-LCM-VAM).

7.1 OBJECTIVES

After going through this unit, you will be able to:

 Understand the linear programming formulation of transportation problem
 Identify the loops in the transportation problems
 Finding an initial base in the transportation problem
 Define the existence of solution of transportation problem
 Explain the transhipment problem
 Illustrate the feasible solution (NWCM - LCM - VAM)

7.2 LINEAR PROGRAMMING FORMULATION OF

TRANSPORTATION PROBLEMS

There are numerous categories of Linear Programming (LP) models that exhibit
an exceptional and unique structure that helps in the formulation of efficient algorithms
for finding their solutions. These structures helped to solve larger problems which
otherwise would not have been possible to solve using the existing technology.
Traditionally, the first or initial of these special and unique structures that were
typically analysed is termed as the Transportation Problem (TP) are considered
as a particular type of network problem. Principally, it provided an efficient solution
to the problem to be solved and was considered as the initial most widespread
application of Linear Programming Problems (LPP) that were typically used for
the industrial logistics.

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 In the field of linear programing, the ‘Network Models’ are considered as Linear Programming
and Transportation
the most significant and unique structures. The problems are solved using the special Problem
rules of the simplex methods which yield the result on the basis of the structure of
the network model.
NOTES
The network model of transportation problems typically defines the unique
method of transportation of a product which has been manufactured at different
plants or factories (supply origins) to a number of manufactured at different
warehouses (demand destinations). This is solved using the transhipment method
or the transhipment problem. In this case we know or assume about the total
number of units that can be produced at each plant or factory and the total number
of units that are required in the market. The product is not sent directly from
source (plant or factory) to destination (market), but it is first stored at the
intermediary points namely the warehouses or distribution centers, and then routed
to the required destination market.
The objective is to minimize the variable cost of production of product in
demand and then shipping the products to meet the consumer’s demand. The
different sources, destinations, and the intermediate points are jointly termed as
the ‘Nodes’ of the network, and the various transportation links which connect
these nodes are termed as ‘Arcs’.
Fundamentally, the Transportation Problem (TP) is usually concerned with
the distribution of a certain commodity/product from several origins/sources to
several destinations with minimum total cost through single mode of transportation.
A necessary and sufficient condition for the existence of a feasible solution to a
transportation problem is that the transportation problem must be balanced. A
Balanced Transportation Problem (BTP) is a transportation problem in which the
total supply is equivalent to the total demand.
Loops in the Transportation Problems
In the transportation problems, the term ‘Loop’ or ‘Path’ is defined as an ordered
sequence of at least four different cells that satisfy all the following three conditions:
1. Any two consecutive cells lie in either the same row or same column.
2. No three or more consecutive cells lie in the same row or column.
3. The last cell is in the same row or column as the first cell.
The loops can be used to improve the basic feasible solution, and its process
are described in the following four steps.
Step 1: Find the only loop involving the entering variable and some of the basic
feasible variables.
Step 2: Count the cells in the loop (starting from 0), label them as odd cells or
even cells.
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Linear Programming Step 3: Find the odd cell with the smallest value. Call this value, say . This cell
and Transportation
Problem corresponds to the leaving variable.
Step 4: Decrease each odd cell in the loop by and increase each even cell in the
NOTES loop by .
Since, the position of the entering variable is already known hence one can
find the only possible loop. In the beginning, we start moving up from the entering
variable, and then move to the right to the last basic variable in the row, the directions
are selected random. Now mark the loop cells as even and odd.
Finding an Initial Base in the Transportation Problems
We can determine an initial basic feasible solution in the transportation problems
using any one of the following three methods:
1. North West Corner Rule (NWCR)
2. Least Cost Method (LCM) or Matrix Minimum Method
3. Vogel Approximation Method (VAM)
Follow the steps given below for determining an initial basic feasible solution.
Step 1: Determine the values of dual variables.
Step 2: Compute the opportunity cost.
Step 3: Now check the sign of each opportunity cost as follows:
 If the opportunity costs of all the unoccupied cells are either positive or
zero, then the given solution is the optimal solution.
 If one or more unoccupied cell has negative opportunity cost, then the given
solution is not an optimal solution and further savings in transportation cost
are possible.
Step 4: Select the unoccupied cell with the smallest negative opportunity cost as
the cell to be included in the next solution.
Step 5: Draw a closed path or loop for the unoccupied cell selected in the Step 4.
The right angle turn in this path is permitted only at occupied cells and at the
original unoccupied cell.
Step 6: Assign alternate plus and minus signs at the unoccupied cells on the corner
points of the closed path or loop with a plus sign at the cell being evaluated.
Step 7: Determine the maximum number of units that should be shipped to this
unoccupied cell.
The smallest value with a negative position on the closed path or loop specifies
the number of units that can be shipped to the entering cell. An unoccupied cell
becomes an occupied cell by adding the quantity to all the cells on the corner
points of the closed path or loop that are marked with plus signs, and then by
subtracting it from those cells which are marked with minus signs.

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 Linear Programming
7.3 EXISTENCE OF SOLUTION OF and Transportation
Problem
TRANSPORTATION PROBLEMS

The linear programming model of a transport problem is: NOTES

Minimize Z =  CijXij where, i = 1, 2, ……, n and j = 1, 2, ….., m.
Here, Xij is the amount to be moved from source i to destination j, and Cij
is the cost of movement from source i to destination j.
The constraints are:
Xij = ai where, i = 1, 2, ……, n. This is the row sum and shows total
supply.
Xij = bj where, j = 1, 2, ….., m. This is the column sum and shows total
demand.
And xij  0
A transport problem is balanced if,
ai = bj, which means that the total supply = Total demand.
Let us take the example of a balanced problem. The total supply equals the
total demand.
In the simplex method, at each step, we send units along a route that is
unused in the current basic feasible solution and eliminate one of the roots that is
currently in use.
This may be visualized as follows:

d1 1 1 s1

d2 2 2 s2

d3 3 m sm

dn n

Demand Supply

Let us take the following supply chain network to solve using the simplex
method.

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Linear Programming Storage Dealers Supply
and Transportation
Problem 1 2 3 4
1 12 13 4 6 500
2 6 4 10 11 700
NOTES 3 10 9 12 4 800
Demand 400 900 200 500 2000

The solution is reached two phases.

Phase I
Step 1 We start with cell in the North West corner.
500
700
800
400 900 200 500

Step 2 Now, we allocate as many units as possible that are consistent with demand
and the available supply.
Step 3 Move one cell right if supply still remains, else move one cell down.
Step 4 Repeat Step 2.
Construction of initial basic feasible solution (BFS)
400 100
700
800
0 900 200 500

400 100 0
700
800
0 800 200 500

400 100 0
700 0
800
0 100 200 500

400 100 0
700 0
100 700
0 0 200 500

400 100 0
700 0
100 200 500
0 0 0 500
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 400 100 0 Linear Programming
and Transportation
700 0 Problem
100 200 500 0
0 0 0 0
NOTES
The basic feasible solution is like a tree network.
C11, X11
d1 1 1 s1

d2 2 s2
2

d3 3 3 s3

d4 4

Demand Supply

Phase II
Step 1 Find the shadow price for each supply side ui and each demand side vj
such that ui + vj = Cij for every used cell, which is the basic variable. Set vn = 0.
Step 2 Now, make calculations for reduced costs rij = Cij – ui – vj for the unused
cells that are the non-basic variables. Now, if the reduced cost for every unused
cell is non-negative, then the solution is optimal.
Step 3 Now, select an unused cell with the most negative reduced cost. Use a
chain reaction cycle to find the maximum number of units (µ) that can be allocated
to the cell and then adjust the allocation appropriately. Update the values of the
new set of used cells (BFS).
Step 4 Move to Step 1.
Now find the shadow prices:
12 13 u1
4 u2
9 12 4 u3
v1 v2 v3 v4 = 0

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Linear Programming 12 13 u1
and Transportation
Problem 4 u2
9 12 4 u3 = 4
v1 v2 v3 v4 = 0
NOTES

12 13 u1
4 u2
9 12 4 u3 = 4
v1 v2 v3 = 8 v4 = 0

12 13 u1
4 u2
9 12 4 u3 = 4
v1 v2 = 5 v3 = 8 v4 = 0

12 13 u1
4 u2 = –1
9 12 4 u3 = 4
v1 v2 = 5 v3 = 8 v4 = 0

12 13 u1 = 8
4 u2 = –1
9 12 4 u3 = 4
v1 v2 = 5 v3 = 8 v4 = 0

12 13 u1 = 8
4 u2 = –1
9 12 4 u3 = 4
v1 = 4 v2 = 5 v3 = 8 v4 = 0

Reduced cost coefficients

12 13 4 6 u1 = 8
6 4 10 11 u2 = –1
10 9 12 4 u3 = 4
v1 = 4 v2 = 5 v3 = 8 v4 = 0

12 / 0 13 / 0 4 / –12 6 / –2 u1 = 8
6/3 4 10 / 3 11 / 12 u2 = –1
10 / 2 9/0 12 / 0 4/0 u3 = 4
v1 = 4 v2 = 5 v3 = 8 v4 = 0
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Chain reaction cycle Linear Programming
and Transportation
400 100 (–) (+) 0 Problem

700 0
100 (+) 200 (–) 500 0
NOTES
0 0 0 0

Here,  = 100
C11, X11
d1 1 1 s1

d2 2 s2
2

d3 3 3 s3

d4 4

Demand Supply

The updated modified BFS is given as:

400 100 0
700 0
200 100 500 0
0 0 0 0

7.4 SOLUTION OF A TRANSPORTATION

PROBLEM

In a transportation problem, where shipments are allowed only between source-

sink pairs, there is a possibility of existing points via which units of a goods/
merchandise may be transhipped from a source to a sink. It is a strong assumption
that shipments may be allowed between sources and between sinks, and also,
inter-linking source-sink. Transportation models which have these additional features
are called transhipment problems. Often, we see a gradual shift towards conversion
from a transhipment problem to a transportation problem. This conversion
procedure is of great significance as it broadens the applicability of algorithm as a
solution for transportation problems. This conversion procedure can be well defined
with the following example:
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Linear Programming Transhipment Problem-to-Transportation Problem
and Transportation
Problem
An organic food company manufactures cereals in two cities, Leeds and Kent.
The daily cereal production capacity at Leeds and Kent are 160 and 200 packets,
NOTES respectively. Cereals are shipped by air to consumers in London and New York.
The consumers in each city require 140 packets of cereals per day. However, due
to the deregulation of air fares, the organic food company believes that it may be
cheaper to fly some variety of cereals to Leeds or Dallas, and then do the final
packaging fly the packets of cereals to London and New York (final destinations).
The table given below shows the cost of flying one packet of the cereal between
these cities:

From  Leeds Kent London Dallas New York

Leeds £0 — £9 £ 14 £ 29
Kent — £0 £ 16 £ 13 £ 26
London — — £0 £7 £ 18
Dallas — — £7 £0 £ 17
New York — — — — £0

Now, to minimize the total incurred cost of daily shipments of the cereals to
its consumers, we first need to understand terminologies, such as source and sink.
Source is a city that can send products, however cannot receive any product from
any other city. Whereas, sink is a city that can receive products but cannot send to
any other city.
So, in this example we can say, that Leeds and Kent are source, and Leeds
and Dallas are transhipment points, and finally, London and New York are sinks
(each with a daily requirement of 140 packets of cereals).
So, we see a mismatch in demand and supply with total supply equals to
156 and the total demand equals to 122.
Now, to solve this imbalance we need to create a dummy sink, with a
demand of 34. We would now have 2 sources, 2 sinks, and 2 transhipment points.
As discussed before, transhipment points can act in dual roles, both as sources
and sinks. As there are no transportation costs from a transhipment point to itself,
the primary objective to reduce costs remain infect.
Therefore, we should perform a reformulation and use the transhipment points
as an optimal solution for imbalanced demand-supply as well as reduce
transportation problem (costs) to ensure maximization of profits.
7.4.1 Transhipment Model
In a transhipment model, the objects are supplied from various specific sources to
various specific destinations. It is also economic if the shipment passes via the
transient nodes which are in between the sources and the destinations. It is different
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from transportation problem where the shipments are directly sent from a specific Linear Programming
and Transportation
source to a specific destination, whereas in the transhipment problem the main Problem
goal is to reduce the total cost of shipments. Hence, the shipment passes via one
or more intermediary nodes before it reaches its desired specific destination.
Basically, there are two methods of evaluating transhipment problems as discussed NOTES
below.
The following is the schematic illustration of the sources and destinations
acting as transient nodes of a simple transhipment problem.

Fig. 7.1 Schematic Diagram of Simple Transhipment Model

The figure shows the shipment of objects from source S1 to destination D2.
Shipment from source S1 can pass via S2 and D1 before it reaches the desired
destination D2. Because the shipment passes via the particular transient nodes, this
arrangement is named as transhipment model. The goal of the transhipment problem
is to discover the optimal shipping model so that the total transportation cost is
reduced.
Figure 7.2 shows a different approach where the number of first starting
nodes and also the number of last ending nodes is the sum of the total number of
sources and destinations of the original problem. Let B be the buffer which should
be maintained at every transient source and transient destination. Considering it as
a balanced problem, buffer B at the least may be equal to the sum of total supplies
or the sum of total demands. Therefore, a constant B is further added to all the
starting nodes and the ending nodes as shown below:
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Linear Programming
and Transportation
Problem

NOTES

Fig. 7.2 Modified Version of Simple Transhipment Problem

Here in the modified version of simple transhipment model, the destinations

D1, D2, D3, ..., Di,..., Dn are incorporated as added starting nodes which basically
acts as the transient nodes. Hence, these do not have the original supplies and at
least the supply of every transient node must be equal to B. Therefore, every
transient node is assigned B units of supply value. Also, the sources S1, S2, S3,...,
Sj..., Sm are incorporated as added ending nodes which basically act as the transient
nodes. These nodes too do not have the original demands but every transient
node is assigned B units of demand value. To make it a balanced problem, B is
further added to every starting node and to the ending nodes. Hence, the problem
resembles a usual transportation problem and can be solved to obtain the optimum
shipping plan.
Example 7.1: The following is the transhipment problem with 4 sources and
2 destinations. The supply values of the sources S1, S2, S3 and S4 are 100,
200, 150 and 350 units respectively. The demand values of destinations D1
and D2 are 350 and 450 units respectively. Transportation cost per unit between
various defined sources and destinations are given in the following table. Solve
the transhipment problem.

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 Linear Programming
and Transportation
Destination
Problem
S1 S2 S3 S4 D1 D2

S1 0 4 20 5 25 12 NOTES
S2 10 0 6 10 5 20

Source S3 15 20 0 8 45 7

S4 20 25 10 0 30 6

D1 20 18 60 15 0 10

D2 10 25 30 23 4 0

Solution: In the above table the number of sources is 4 and the number of
destinations is 2. Therefore, the total number of starting nodes and the ending
nodes of the transshipment problem will be 4 + 2 = 6. We also have,
n m
B   ai   b j
i 1 j 1

The following is the detailed format of the transshipment problem after

including transient nodes for the sources and destinations. Here, the value of B is
added to all the rows and columns.

Destination Supply

S1 S2 S3 S4 D1 D2

S1 0 4 20 5 25 12 100+800=900

S2 10 0 6 10 5 20 200+800=1000

S3 15 20 0 8 45 7 150+800=950
Source
S4 20 25 10 0 30 6 350+800=1150

D1 20 18 60 15 0 10 800

D2 10 25 30 23 4 0 800

800 800 800 800 350+800=1150 450+800=1250

The optimal solution and the corresponding total cost of transportation is

Rs 5,600. The allocations defined in the main diagonal cells are ignored. The
diagrammatic representation of the optimal shipping pattern of the shipments related
to the off-diagonal cells is shown in Figure 7.3:

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Linear Programming
S1
and Transportation
Problem D1
100
300
S2
NOTES 50
150
S3
D2
350
S4
Optimal Shipping Pattern
Fig. 7.3 Optimal Shipping Pattern

7.5 FEASIBLE SOLUTION (NWCM - LCM - VAM)

Optimal solution is a feasible solution (not necessarily basic) which minimizes the
total cost.
The solution of a Transportation Problem (TP) can be obtained in two stages,
namely initial solution and optimum solution.
Initial solution can be obtained by using any one of the three methods, viz.
(i) North West Corner Rule (NWCR)
(ii) Least Cost Method (LCM) or Matrix Minima Method
(iii) Vogel’s Approximation Method (VAM)
VAM is preferred over the other two methods, since the initial basic feasible
solution obtained by this method is either optimal or very close to the optimal
solution.
The cells in the transportation table can be classified as occupied cells and
unoccupied cells. The allocated cells in the transportation table is called occupied
cells and empty cells in a transportation table is called unoccupied cells.
The improved solution of the initial basic feasible solution is called optimal
solution which is the second stage of solution, that can be obtained by MODI
(Modified Distribution Method).
1. North West Corner Rule (NWCR)
Step 1: Starting with the cell at the upper left corner (North West) of the
transportation matrix we allocate as much as possible so that either the capacity of
the first row is exhausted or the destination requirement of the first column is
satisfied, i.e., X11 = Min (a1,b1).
Step 2: If b1>a1, we move down vertically to the second row and make the
second allocation of magnitude X22 = Min(a2 b1 – X11) in the cell (2, 1).
If b1<a1, move right horizontally to the second column and make the second
allocation of magnitude X12 = Min (a1, X11 – b1) in the cell (1, 2).
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 If b1 = a1, there is a tie for the second allocation. We make the second Linear Programming
and Transportation
allocations of magnitude, Problem

X 12  Min (a1  a1 , b1 )  0 in the cell (1, 2)

or, X 21  Min (a2 , b1  b1 )  0 in the cell (2,1) NOTES
Step 3: Repeat steps 1 and 2 moving down towards the lower right corner of the
transportation table until all the rim requirements are satisfied.
Example 7.2: Obtain the initial basic feasible solution of a transportation problem
whose cost and rim requirement table is as follows:

Solution: Since ai = 34 = bj, there exists a feasible solution to the transportation
problem. We obtain initial feasible solution as follows.
The first allocation is made in the cell (1, 1) the magnitude being,
X11 = Min (5, 7) = 5.
The second allocation is made in the cell (2, 1) and the magnitude of the
allocation is given by X21 = Min (8, 7 – 5) = 2.

The third allocation is made in the cell (2, 2) the magnitude X22 = Min
(8 – 2, 9) = 6.
The magnitude of the fourth allocation is made in the cell (3, 2) given by
X32 = Min (7, 9 – 6) = 3.
The fifth allocation is made in the cell (3, 3) with magnitude X33 = Min
(7 – 3, 14) = 4.
The final allocation is made in the cell (4, 3) with magnitude X43 = Min
(14, 18 – 4) = 14.

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Linear Programming Hence, we get the initial basic feasible solution to the given TP and is given by,
and Transportation
Problem X11 = 5; X21 = 2; X22 = 6; X32 = 3; X33 = 4; X43 = 14
Total Cost = 2 × 5 + 3 × 2 + 3 × 6 + 3 × 4 + 4 × 7 + 2 × 14
NOTES =10 + 6 + 18 + 12 + 28 + 28 = Rs 102
Example 7.3: Determine an initial basic feasible solution to the following
transportation problem using North West Corner Rule (NWCR).

Solution: The problem is a balanced TP as the total supply is equal to the total
demand. Using the steps we find the initial basic feasible solution as given in the
following table.

The solution is given by,

X11 = 6; X12 = 8; X22 = 2; X23 = 14; X33 = 1; X34 = 4
Total Cost = 6 × 6 + 4 × 8 + 2 × 9 + 2 × 14 +6 × 1 + 2 × 4
= 36 + 32 + 18 + 28 + 6 + 8 = Rs 128.
Least Cost Method (LCM) or Matrix Minima Method
Step 1: Determine the smallest cost in the cost matrix of the transportation table.
Let it be Cij. Allocate Xij = Min (ai, bj) in the cell (i, j).
Step 2: If Xij = ai cross off the ith row of the transportation table and decrease
bj by ai. Then go to Step 3.
If Xij = bj cross off the jth column of the transportation table and decrease
ai by bj. Go to Step 3.
If Xij = ai = bj cross off either the ith row or the jth column but not both.
Step 3: Repeat Steps 1 and 2 for the resulting reduced transportation table until
all the rim requirements are satisfied. Whenever the minimum cost is not unique,
make an arbitrary choice among the minima.
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Example 7.4: Obtain an initial feasible solution to the following TP using Matrix Linear Programming
and Transportation
Minima Method. Problem

NOTES

Solution: Since ai = bj = 24, there exists a feasible solution to the TP using the
steps in the least cost method, the first allocation is made in the cell (3, 1) the
magnitude being X31 = 4. This satisfies the demand at the destination D1 and we
delete this column from the table as it is exhausted.

The second allocation is made in the cell (2, 4) with magnitude X24 = Min
(6, 8) = 6. Since it satisfies the demand at the destination D4, it is deleted from the
table. From the reduced table, the third allocation is made in the cell (3, 3) with
magnitude X33 = Min (8, 6) = 6. The next allocation is made in the cell (2, 3) with
magnitude X23 of Min (2, 2) = 2. Finally, the allocation is made in the cell (1, 2)
with magnitude X12 = Min (6, 6) = 6. Now, all the requirements have been satisfied
and hence, the initial feasible solution is obtained.
The solution is given by,
X12 = 6; X23 = 2; X24 = 6; X31 = 4; X33 = 6
Since the total number of occupied cells = 5 < m + n – 1
We get a degenerate solution.
Total Cost×××××
Rs 28.
Example 7.5: Determine an initial basic feasible solution for the following TP,
using the Least Cost Method (LCM).

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Linear Programming Solution: Since ai = bj, there exists a basic feasible solution. Using the steps
and Transportation
Problem in least cost method we make the first allocation to the cell (1, 3) with magnitude
X13 = Min (14, 15) = 14 (as it is the cell having the least cost).
This allocation exhaust the first row supply. Hence, the first row is deleted.
NOTES
From the reduced table, the next allocation is made in the next least cost cell (2, 3)
which is chosen arbitrarily with magnitude X23 = Min (1, 16) = 1. This exhausts
the 3rd column destination.
From the reduced table the next least cost cell is (3, 4) for which allocation
is made with magnitude Min (4, 5) = 4. This exhausts the destination D4 requirement.
Delete this fourth column from the table. The next allocation is made in the cell
(3, 2) with magnitude X32 = Min (1, 10) = 1 which exhausts the 3rd origin capacity.
Hence, the 3rd row is exhausted. From the reduced table the next allocation is
given to the cell (2,1) with magnitude X21 = Min (6, 15) = 6. This exhausts the first
column requirement. Hence, it is deleted from the table.
Finally, the allocation is made to the cell (2, 2) with magnitude X22 = Min
(9, 9) = 9 which satisfies the rim requirement. These allocation are shown in the
transportation table as follows:

(I Allocation) (II Allocation)

(III Allocation) (IV Allocation)

(V, VI Allocation)
The following table gives the initial basic feasible solution.

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 Linear Programming
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Problem

NOTES

The solution is given by,

X13=14; X21=6; X22= 9; X23= 1; X32= 1; X34= 4
 Transportation Cost
= 14 × 1 + 6 × 8 + 9 × 9 + 1 × 2 + 3 × 1 + 4 × 2
= 14 + 48 + 81 + 2 + 3 + 8 = Rs 156.
Vogel’s Approximation Method (VAM)
Vogel Approximation Method (VAM) is used to find the feasible solution for
transportation of goods where the solution is either optimal or near to the optimal
solution. Typically, this method is used to reduce the transportation costs by
interpreting using a mathematical table the transportation costs from one place to
another. In the table, the column represents the demand centres while the row
represents the supply points. The following are the general steps used in VAM:
Step 1: Identify the minimum and next minimum numbers in a column and repeat
the same for the row.
Step 2: The above step is repeated for all other columns and rows.
Step 3: Now, subtract the two numbers identified for each column and each row
such that the difference is positive.
Step 4: Identify the maximum difference among all the rows and also among all the
columns.
Step 5: Assign all the demand units for that minimum number in that column which
has got the maximum difference (repeat the same for the row).
Step 6: Remove that column and row completely and repeat the above process
until all the demand units are filled up completely.
Vogel’s Approximation Method (VAM) also takes costs into account in allocation.
The steps involved in this method for finding the initial solution are as follows.
Step 1: Find the penalty cost, namely the difference between the smallest and next
smallest costs in each row and column.
Step 2: Among the penalties as found in Step (1) choose the maximum penalty. If
this maximum penalty is more than one (i.e., if there is a tie) choose any one
arbitrarily.
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Linear Programming Step 3: In the selected row or column as by Step (2) find out the cell having the
and Transportation
Problem least cost. Allocate to this cell as much as possible depending on the capacity and
requirements.
Step 4: Delete the row or column which is fully exhausted. Again, compute the
NOTES
column and row penalties for the reduced transportation table and then go to Step
(2). Repeat the procedure until all the rim requirements are satisfied.
Note: If the column is exhausted, then there is a change in row penalty and vice
versa.
Example 7.6: Find the initial basic feasible solution for the following transportation
problem using VAM.

Solution: Since ai = bj = 950, the problem is balanced and there exists a
feasible solution to the problem.
First, we find the row and column penalty PI as the difference between the
least and the next least cost. The maximum penalty is 5. Choose the first column
arbitrarily. In this column, choose the cell having the least cost name (1, 1). Allocate
to this cell with minimum magnitude (i.e., Min (250, 200) = 200.) This exhausts
the first column. Delete this column. Since a column is deleted, then there is a
change in row penalty PII and column penalty PII remains the same. Continuing in
this manner, we get the remaining allocations as given in the following table below.
I Allocation II Allocation

1
1

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 III Allocation IV Allocation Linear Programming
and Transportation
Problem

NOTES

V Allocation VI Allocation

Finally, we arrive at the initial basic feasible solution which is shown in the
following table.

There are 6 positive independent allocations which equals to m + n –1 =

3 + 4 – 1. This ensures that the solution is a non-degenerate basic feasible solution.
Transportation Cost
11 × 200 + 13 × 50 + 18 × 175 + 10 × 125 + 13 × 275 + 10 × 125 =
12,075.
Example 7.7: Find the initial solution to the following TP using VAM.

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Linear Programming Solution: Since ai = bj the problem is a balance TP. Hence, there exists a
and Transportation
Problem feasible solution.

NOTES

Finally, we have the initial basic feasible solution as given in the following
table.

There are 6 independent non-negative allocations equal to m + n – 1 = 3 +

4 – 1 = 6. This ensures that the solution is non-degenerate basic feasible.
 Transportation Cost
= 3 × 45 + 4 × 30 + 1× 25 + 2 × 80 + 4 × 45 + 1 + 75
= 135 + 120 + 25 + 160 + 180 + 75
= 695.
Example 7.8: An organization has four destinations (D1, D2, D3 and D4) and
three sources (S1, S2 and S3) for supply of goods. The transportation cost per unit
is given below. The total availability is 700 units which exceeds the cumulative
demand of 600 units. Find the optimal transportation scheme for this condition
using the Vogel’s Approximation Method or VAM.

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 Linear Programming
and Transportation
Problem

NOTES

Solution: The solution is obtained as follows.

Step 1: First check for balance of supply and demand
Supply = 250 + 200 + 250 = 700 units
Demand = 100 + 150 + 250 + 100 = 600 units
Decision Rule
(i) If Supply = Demand then go to next step.
(ii) If Supply > Demand then add a ‘Dummy Destination’ with zero transportation
cost.
(iii) If Supply < Demand then add a ‘Dummy Source’ with zero transportation
cost.
In the given problem, Supply > Demand.
Hence, we add a ‘Dummy Destination’ say D5 with zero transportation cost and
balance demand which is difference in supply and demand (= 100 units). The
initial transportation matrix is now formulated with transportation cost in each route.
Each cell of the transportation matrix represents a possible route. In the following
table, dummy column is introduced for balancing the supply and demand.

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Linear Programming Step 2: (i) Decide the nature of problem, i.e., minimization of transportation cost.
and Transportation
Problem (ii) Make initial assignment using the Vogel’s approximation method.
(i) Select the lowest transportation cost route in the initial matrix. For example, it
NOTES is route S1D5, S2D5 and S3D5 in the given problem with zero transportation cost.
Allocate the minimum of remaining balance of supply (in last column) and demand
(in last row).
In this method, we calculate the difference between the two least-cost routes
for each row and column. The difference is called as penalty cost for not using the
least-cost route. Following table shows the first calculation of ‘Penalty’ cost in
VAM.

Highest of all calculated penalty costs is for S3 and S2. Therefore, allocation
is to be made in row of source S3. The route or cell which should be selected
should be the lowest cost of this row, i.e., the route S3D5. Hence, first allocation in
Vogel’s method is as follows.

With the first allocation, destination D5 is used. Leave out this column and
develop the remaining matrix for calculating the penalty cost. We obtain the
following matrix.
Now for this, source S1 has highest penalty cost. For this row, the least cost
route is S1D1. Hence, next assignment is due in this route:
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 Linear Programming
and Transportation
Problem

NOTES

Second Calculation of Penalty Cost in VAM

Second allocation in Vogel’s method is obtained as follows:

After second allocation, since destination D1 is used, leave this column and
proceed for calculation of next penalty cost. Allocation is done in route S1D2.
Since there is tie between all routes, break the tie by arbitrarily selecting any route,
for example S1D2 in this case.
Third Calculation of Penalty Cost in VAM

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Linear Programming Third Allocation in VAM
and Transportation
Problem

NOTES

Fourth Calculation of Penalty Cost in VAM

Fourth Allocation in VAM

With the fourth allocation, column D4 is used. In the only left column D3, the
allocations of 100 units and 150 units are done in route S2D3 and S4D3, respectively.
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Thus, we obtain the following allocations using the Vogel’s Approximation Method Linear Programming
and Transportation
or VAM. Problem

Final Allocation Through Vogel’s Method

NOTES

The initial cost for this allocation is:

(13 × 100 + 16 × 150 + 16 × 100 + 15 × 100 + 17 × 150 + 0 × 100) or equal
to 9350
Step 3: Verify for degeneracy, (m + n – 1) = 7.
Number of filled cell = 6, which is one less than (m + n + 1). Hence, go to Step 4
for removing the degeneracy.
Step 4: Now we allocate in the least cost unfilled cell. This cell is route S1D5 or
S2D5. Select route S1D5. We obtain the following matrix after removing degeneracy.
Final Allocation After Removing Degeneracy in Vogel’s Method

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Linear Programming Optimization of Initial Assignment
and Transportation
Problem
The initial feasible assignment done by using Vogel’s approximation method does
not guarantee optimal solution. Hence, next step is to check the optimality of the
NOTES initial solution.
Step 5: Check the optimality of the initial solution. For this, calculate the opportunity
cost of un-occupied routes.
First, we start with any row (or column). Select row 1, i.e., source S1. For this
row define row value, u1 = 0. Now consider all filled routes of this row. For these
routes, calculate column values v using following equation:
u1 + v1 = Cij (For any filled route)
Where u1 = Row value
vj = Column value
Cij = Unit cost of assigned route
Once first set of column values is known, say in this case vj is known, locate other
routes of filled cells in these columns. Calculate next of ui or vj values using the
above equation. In this method, for all rows and columns, ui and vj values are
determined for a non-degenerate initial solution.
Step 6: Check the optimality.
Calculate the opportunity of non-allocated or unfilled routes. For this, use the
following equation:
Opportunity Unassigned Route = ui + vj – Cij
Where, ui = Row value
vj = Column value
Cij = Unit cost of unassigned route
If the opportunity cost is negative for all unassigned routes, the initial solution is
optimal. If in case any of the opportunity costs is positive, then go to next step.

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Step 7: Make a loop of horizontal and vertical lines which joins some filled routes Linear Programming
and Transportation
with the unfilled route, which has a positive opportunity cost. Note that all the Problem
corner points of the loop are either filled cells or positive opportunity cost unassigned
cells.
NOTES
For this, we start with row, S1 and take u1 = 0. Now S1D1, S1D2, and S1D5 are
filled cells. Hence, for filled cells (vj = Cij – ui).
v1 = 13 – 0 = 13
v2 = 16 – 0 = 16
v5 = 0 – 0 = 0
The optimality of Vogel’s method’s initial solution is as follows.
Calculation of ui and vj for Vogel Approximation Method’s Initial Solutions

Opportunity cost of above assignment using VAM is as follows:

Unassigned Route Opportunity Cost (ui + vj – Cij)

S1D3 0 + 17 – 19 = –2

S1D4 0 + 16 – 17 = –1

S2D1 –1 + 13 – 17 = –5

S2D2 –1 + 16 – 19 = –4

S2D5 –1 + 0 – 0 = –1

S3D1 0 + 13 – 15 = –2

S3D2 0 + 16 – 17 = –1

S3D4 0 + 16 – 16 = 0

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Linear Programming Since all opportunity costs are negative or zero, the initial assignment of Vogel’s
and Transportation
Problem solution is optimal with total cost of 9350.
Example 7.9: Distances between factory and its warehouses and demand at
each warehouse are given in the following table. Calculate the values of penalty to
NOTES
all the rows and columns for the reduced transportation problem and repeat the
same procedure till the entire requirement has been met. Solve this problem using
Vogel’s Approximation Method or VAM.
Table Transportation Table

Factory/Warehouse W1 W2 W3 Supply
F1 16 22 14 200
F2 18 14 18 150
F3 8 14 16 100
Demand 175 125 150

Solution: The solution is obtained as follows.

Step 1: Compute the penalty for each row and column of the transportation
problems. The penalty for the first row is, (16 - 14) = 2. Similarly the values of
penalty for the second and the third row are 4 and 6.

W1 W2 W3 Supply Penalty

F1 16 22 14 200 2

F2 18 14 18 150 4

F3 8 14 16 100 6

Demand 175 125 150

8 0 2

Similarly, the values of penalty for the first, second and the third columns are 8, 0
and 2, respectively.
Step 2: Identify the row or column with the largest penalty value. In this case, the
first column with a penalty value is 8.
Step 3: The cell with the least cost is chosen and the possible number of goods is
assigned to that cell. Therefore, assign 100 to the cell (F3, W1).
Step 4: If the remaining row supply or column demand is zero, remove that row/
column.
Now, the transportation problem can be reduced as illustrated in the following
table:

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 W1 W2 W3 Supply Penalty Linear Programming
and Transportation
F1 16 22 14 200 2 Problem
F2 18 14 18 150 4
Demand 75 125 150
Penalty 2 8 4 NOTES
Step 5: The process is repeated for the reduced transportation problem till the
entire supply at the factories is assigned to satisfy the demand at different
warehouses.
Now, the W2 column has the highest penalty, i.e., 8. Therefore, assign 125 units to
the cell (F2, W2) since the cell has the least cost in the W2 column.
Then the transportation problem can further be reduced as illustrated in the following
table:
W1 W3 Supply Penalty
F1 16 14 200 2
F2 18 18 25 0
Demand 75 150
Penalty 2 4

Now, the W3 column has the highest penalty, i.e., 4. Next assign 150 units
to the cell (F1, W3) since the cell has the least cost. Then remove the W3 column
and the remaining units are assigned to the cells (F1, W1) and (F2, W1). Thus, 50
units are assigned to the cell (F1, W1) and 25 units to the cell (F2, W1).
Since the number of cells occupied is 5, i.e., (3+31), the solution obtained
is a feasible solution. Thus, the cost obtained using VAM is:
(50 × 16) + (25 × 18) + (100 × 8) + (125 × 14) + (150 × 14) = Rs.5,900.

Check Your Progress

1. Explain the linear programming formulation of transportation problem.
2. Discuss the loops in the transportation problem.
3. Illustrate the finding of an initial base in the transportation problem.
4. Define the transhipment problem.
5. Analyse the feasible solution (NWCM - LCM - VAM).
6. Define the first two steps of least cost method.
7. Explain the first three steps of Vogel’s approximation method.

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