Busmath42: L3 Distribution and Network Models

Business Mathematics 42
LESSON 3: CHAPTER 6: DISTRIBUTION AND NETWORK MODELS

TRANSPORATION MODEL
• The transportation problem arises frequently in planning for the distribution of goods and services from several supply
locations to several demand locations. Typically, the quantity of goods available at each supply location (origin) is limited,
and the quantity of goods needed at each of several demand locations (destinations) is known.
• Objective: Minimize the cost of shipping goods from the origins to the destinations

TRANSPORTATION ALGORITHM
➢ An iterative procedure in which a solution to a transportation problem is found and evaluated using a special procedure to
determine whether the solution is optimal.
➢ If it is optimal, the process stops. If it is not optimal, a new solution is generated. This new solution is at least as good as the
previous one, and it is usually better. The process continues until the optimal solution is found.

STEPS
1. Set up a balance transportation model
2. Develop initial solution using the Northwest Corner Method
3. Calculate an improvement index
4. Select the cell with the improvement index indicating the greatest decrease in cost

Stepping Stone Method → used to find the optimal solution

➢ This process has two distinct parts:
o The first involves testing the current solution to determine if improvement is possible
o second part involves making changes to the current solution in order to obtain an improved solution
➢ To verify whether the initial solution is the optimal solution, all must be positive value
➢ Pattern of sign is alternate positive (+) negative (-)

THREE TYPES OF TRANSPORTATION MODEL

1. Balanced → Demand = Supply
2. Unbalanced → Demand ≠ Supply
Supply > Demand
Demand > Supply
3. Degeneracy → # of Inputs = R + C -1 is NOT MET

BALANCE PROBLEM
• Deals with the distribution of goods from several points of supply (origin of sources) to a number of points of demand
(destination)

EXAMPLE:
FIRST ITERATION

Total Cost Stepping Stone Method

D to A 100*5 500 D to B 4–5+8–4 3
All of these must be
D to B 200*8 1600 D to C 3 –5 + 8 – 4 +7 – 5 4
positive to be an
E to A 100*4 400 E to C 3–4 +7–5 1
optimal solution
E to C 100*7 700 F to A 9–7+4–8 -2
F to A 200*5 1000
Initial Solution 4200

SECOND ITERATION:

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 Busmath42: L3 Distribution and Network Models

THIRD ITERATION:

TRANSPORTATION MODEL: UNBALANCED TRANSPORTATION PROBLEMS

➢ Situation occurring quite frequently in real-life problems is the case in which total Demand ≠ total Supply
➢ In the event that total supply is greater than total demand, Supply > Demand, a dummy destination (warehouse), with
demand exactly equal to the surplus, is created.
➢ If total demand is greater than total supply, Demand > Supply, we introduce a dummy source (factory) with a supply equal
to the excess of demand over supply.

DEMAND < SUPPLY

FIRST ITERATION

SECOND ITERATION

DEMAND > SUPPLY

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 Busmath42: L3 Distribution and Network Models
FIRST ITERATION

SECOND ITERATION (Degeneracy)

If DB is = 0 If DC = 0

TRANSPORTATION MODEL: DEGENERACY

➢ R+C-1 is not satisfied
➢ Degeneracy occurs when the number of occupied squares or routes in a transportation table solution is less than the number
of rows plus the number of columns minus 1
➢ Indicates that one blank value in a stepping stone will go dead end. Thus, need to assume a zero-quantity

Number of Inputs = # of Columns + # of Rows – 1

FIRST ITERATION: R + C -1 = 3 + 3 -1 = 5
D to B = 0 D to C = 0
D to A 100*8 800 D to A 100*8 800
D to B 0*2 0 D to C = 0 0*6 0
E to B 100*9 900 E to B 100*9 900
E to C 20*9 180 E to C 20*9 180
F to C 80*7 560 F to C 80*7 560
Initial Solution 2440 Initial Solution 2440

Stepping Stone Method Stepping Stone Method

D to C 6-2+9-9 4 D to B 2-6+9-9 -4
E to A 10-9+2-8 -5 E to A 10-9+6-8 -1
F to A 7-7+9-9+2-8 -6 F to A 7-7+6-8 -2
F to B 10-7+9-9 3 F to B 10-7+9-9 3

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 Busmath42: L3 Distribution and Network Models
SECOND ITERATION:
A B C Factory Capacity
8 2 6
D 100
20 80
10 9 9
E 120
20 100 Stepping Stone Method
7 10 7 D to C 6-2+9-9 4
F 80
80 E to A 10-9+2-8 -5
Warehouse 100 100 100 300 F to B 10-7+8-2 9
Requirement F to C 7-7+8-2+9-9 6

THIRD ITERATION
D to A = 0 D to C = 0
D to A 0*8 0 D to B 100*2 200
D to B 100*2 200 D to C 0*6 0
E to A 20*10 200 E to A 20*10 200
A B C Factory Capacity E to C 100*9 900 E to C 100*9 900
8 2 6 F to A 80*7 560 F to A 80*7 560
D 100 1860 Optimal Solution 1860
100 0
10 9 9
E 120 Stepping Stone Method Stepping Stone Method
20 100
D to C 6-8+10-9 -1 D to A 8-6+9-10 1
7 10 7 E to B 9-10+8-2 5 0 E to B 9-9+6-2 4
F 80
80 F to B 10-7+8-2 9 F to B 10-7+10-9+6-2 8
Warehouse Reuirement
100 100 100 300 F to C 7-7+10-9 1 F to C 7-7+10-9 1

ASSIGNMENT PROBLEM
➢ An assignment problem can be viewed as a transportation problem in which the capacity from each source (or person to be
assigned) is 1 and the demand at each destination (or job to be done) is 1.
➢ One important characteristic of assignment problems is that only one job or worker is assigned to one machine or project
➢ Objective: Minimize total costs or total time of performing the tasks at hand.
➢ Involve determining the most efficient assignment of people to projects, sales people to territories, auditors to companies for
audits, contracts to bidders, jobs to machines, heavy equipment (such as cranes) to construction jobs, and so on.

ASSIGNMENT ALGORITHM
1. Find the opportunity cost table
(Subtracting the smallest number in each row)
(Subtracting the smallest number in each column)
2. Test the table to see whether an optimal assignment can be made.
Line = # Columns (People) = # Rows (Projects)
3. Revised the opportunity table if not satisfied and follow step 2.
→ Use Hungarian Method

The Hungarian method of assignment → provides us with an efficient means of finding the optimal solution without having to
make a direct comparison of every option. It operates on a principle of matrix reduction, which means that by subtracting and
adding appropriate numbers in the cost table or matrix, we can reduce the problem to a matrix of opportunity costs

EXAMPLE:
PROJECT
1 2 3
A P11 P14 P6
PEOPLE

B P8 P10 P11
C P9 P12 P7
By row By column
PROJECT PROJECT
1 2 3 1 2 3
A 5 8 0
PEOPLE

A 5 6 0
PEOPLE

B 0 2 3 B 0 0 3
C 2 5 0 C 2 3 0
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 Busmath42: L3 Distribution and Network Models
Hungarian Method People Projects Cost
PROJECT A 3 P6
1 2 3
B 2 P10
A 3 4 0
PEOPLE C 1 P9
B 0 0 5
C 0 1 0 Optimal Cost P25

EXAMPLE:
Four employees must be assigned to four projects. Only one employee can be assigned to each project, and all projects
must be completed. The cost of each employee completing each project is shown below. Determine which employee should be
assigned to which project to minimize total project completion cost. Be sure to compute the total project completion cost.

Project
Employee
1 2 3 4
Al $300 $325 $500 $350
Ben 400 525 575 600
Cal 350 400 600 500
Dan 400 350 450 450

By Row By Column
Project Project
Employee Employee
1 2 3 4 1 2 3 4
Al 0 25 $200 50 Al 0 25 100 0
Ben 0 125 175 200 Ben 0 125 75 150
Cal 0 50 250 150 Cal 0 50 150 100
Dan 50 0 100 100 Dan 50 0 0 50

Hungarian Method People Projects Cost

Project Al 4 350
Employee
1 2 3 4 Ben 1 400
Al 0 75 150 0 Cal 2 400
Ben 0 75 25 100 Dan 3 450
Cal 0 0 100 50 1600
Dan 100 0 0 100 Minimum total project completion cost

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 Busmath42: L3 Distribution and Network Models
NETWORK MODELS

1. Minimal Spanning Tree Technique

2. Maximal Flow Technique
3. Shortest-route Technique

1. MINIMAL SPANNING TREE TECHNIQUE

➢ Involves connecting all the points of a network together while minimizing the distance between them
➢ Can have more than 1 optimal solution

STEPS
1) Select any node in the network
2) Connect this node to the nearest node that minimizes the total distance.
3) Considering all of the nodes that are connected, find and connect the nearest node that is not connected. If there is a tie for the
nearest node, select one arbitrarily. A tie suggests there may be more than one optimal solution.
4) Repeat the third step until all the nodes are connected

EXAMPLE:
The minimal-spanning tree technique involves connecting all the points
of a network together while minimizing the distance between them. It has been
applied, for example, by telephone companies to connect a number of phones
together while minimizing the total length of telephone cable. Let us consider the
Lauderdale Construction Company, which is currently developing a luxurious
housing project in Panama City Beach, Florida. Melvin Lauderdale, owner and
president of Lauderdale Construction, must determine the least expensive way to
provide water and power to each house. The network of houses is shown in Figure
11.1. As seen in Figure 11.1, there are eight houses on the gulf. The distance
between each house in hundreds of feet is shown on the network. The distance
between houses 1 and 2, for example, is 300 feet. (The number 3 is between nodes
1 and 2.) Now, the minimal spanning tree technique is used to determine the
minimal distance that can be used to connect all of the nodes

Connected Unconnected Closest Arc Selected Arc Length Total Distance

(House #) (House #) (House #) (House #) (100 ft each) Cumulative
1 2,3,4,5,6,7,8 3 1 to 3 2 2
1,3 2,4,5,6,7,8 4 3 to 4 2 4
1,3,4 2,5,6,7,8 2,6 1 to 2 3 7
1,2,3,4 5,6,7,8 5,6 2 to 5 3 10
1,2,3,4,5 6,7,8 6 3 to 6 3 13
1,2,3,4,5,6 7,8 8 6 to 8 1 14
1,2,3,4,5,6,8 7 7 7 to 8 2 16
16 x 100 feet 1600 feet

EXAMPLE 2:
Roxie LaMothe, owner of a large horse breeding farm near Orlando, is
planning to install a complete water system connecting all of the various stables and
barns. The location of the facilities and the distances between them is given in the
network shown in Figure. Roxie must determine the least expensive way to provide
water to each facility. What do you recommend?

Connected Unconnected Closest Arc Selected Arc Length Total Distance

1 2,3,4,5,6,7,8 3 1 to 3 8 8
1,3 2,4,5,6,7,8 2 1 to 2 10 18
1,2,3 4,5,6,7,8 4,5 1 to 4 12 30
1,2,3,4 5,6,7,8 7 4 to 7 8 38
1,2,3,4,7 5,6,8 6 6 to 7 10 48
1,2,3,4,6,7 5,8 8 6 to 8 9 57
1,2,3,4,6,7,8 5 5 5 to 6 10 67

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 Busmath42: L3 Distribution and Network Models
2. MAXIMAL FLOW TECHNIQUE
➢ Involves determining the maximum amount of material that can flow from one point (the source) to another (the sink) in a
network.

STEPS
1) Pick any path from the start (source) to the finish (sink) with some flow. If no path with flow exists, then the optimal
solution has been found. Connect this node to the nearest node that minimizes the total distance.
2) Find the arc on this path with the smallest flow capacity available. Call this capacity C. This represents the maximum
additional capacity that can be allocated to this route. Repeat the third step until all the nodes are connected.
3) For each node on this path, decrease the flow capacity in the direction of flow by the amount C. For each node on this path,
increase the flow capacity in the reverse direction by the amount C.
4) Repeat these steps until an increase in flow is no longer possible.

EXAMPLE
Waukesha, a small town in Wisconsin, is in the process of
developing a road system for the downtown area. Bill Blackstone,
one of the city planners, would like to determine the maximum
number of cars that can flow through the town from west to east.
The road network is shown in Figure

Route Maximum
1 to 2 to 6 2
1 to 4 to 6 1
1 to 3 to 5 to 6 2
5

3. SHORTEST – ROUTE TECHNIQUE

➢ The objective of the shortest-route problem is to find the shortest distance from one location to another.
➢ In a network, this often involves determining the shortest route from one node to each of the other nodes

STEPS
1) Find the nearest node to the origin (plant). Put the distance in a box by the node.
2) Find the next-nearest node to the origin (plant), and put the distance in a box by the node. In some cases, several paths will
have to be checked to find the nearest node.
3) Repeat this process until you have gone through the entire network. The last distance at the ending node will be the distance
of the shortest route. You should note that the distance placed in the box by each node is the shortest route to this node. These
distances are used as intermediate results in finding the next-nearest node

EXAMPLE
Every day, Ray Design, Inc., must transport beds, chairs, and
other furniture items from the factory to the warehouse. This
involves going through several cities. Ray would like to find the
route with the shortest distance. The road network is shown in
Figure.

Path Distance
1 to 2 100
2 to 3 50
3 to 5 40
5 to 6 100
290

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