Chapter 3

Distribution: Transportation Problem

 Objectives of the chapter

By the end of this unit you will be able to:

Define transportation problem
Define a balanced and unbalanced transportation problem
Formulate transportation model of both categories
Develop an initial solution of a transportation problem using the
Northwest Corner Rule, least cost rule, and Vogel approximation method
Use the Stepping Stone and modified distribution( UV) methods to find
an optimal solution of a transportation problem
Define assignment problem
Formulate special linear programming problems using the assignment
model
Solve assignment problems with the Hungarian method.

© 2002 Prentice-Hall, Inc Ch 5-2

 Transportation Model
• Transportation problem deals with the distribution of goods
from several points of supply to a number of points of demand.
They arise when a cost-effective pattern is needed to ship items
from origins that have limited supply to destinations that have
demand for the goods.

• Resources to be optimally allocated usually involve a given

capacity of goods at each source and a given requirement for the
goods at each destination.

• Most common objective of the transportation problem is to

schedule shipments from sources to destinations so that
transportation costs and time are minimized
 Transshipment Model
 An extension of transportation problems is called
transshipment problem in which a point can have
shipments that both arrive as well as leave.

 Example would be a warehouse where shipments

arrive from factories and then leave for retail outlets

 It may be possible for a firm to achieve cost savings

(economies of scale) by consolidating shipments from
several factories at a warehouse and then sending
them together to retail outlets.
 Assignment Model
• Assignment problem refers to a class of LP problems that
involve determining most efficient assignment of:
People to projects,
Salespeople to territories,
Contracts to bidders,
Jobs to machines, and so on
• Objective is to minimize total cost or total time of performing
tasks at hand, although a maximization objective is also
possible.
 Transportation Model
Problem definition
• There are m sources. Source i has a supply capacity of Si.
• There are n destinations.The demand at destination j is D j.

• Objective:
 To minimize the total shipping cost of supplying the
destinations with the required demand from the available
supplies at the sources.
 The Transportation Model
Characteristics
A product is to be transported from a number of sources to
a number of destinations at the minimum possible cost.
Each source is able to supply a fixed number of units of
the product, and each destination has a fixed demand for
the product.
The linear programming model has constraints for supply
at each source and demand at each destination.
All constraints are equalities in a balanced transportation
model where supply equals demand.
Constraints contain inequalities in unbalanced models
where supply is not equal to demand.
 Balanced Transportation Model- Example 1
In a balanced transportation model in which supply
equals demand, all constraints are equalities
Balanced Transportation Model Example 1

Transportation Costs Per Desk

 Transportation Model Example 1
LP Transportation Model Formulation
Objective: Minimize total shipping costs =
5 XDA + 4 XDB + 3 XDC + 3 XEA + 2 XEB +
1 XEC + 9 XFA + 7 XFB + 5 XFC

Where: Xij = number of desks shipped from factory i to warehouse j

i = D (for Des Moines),
E (for Evansville), or
F (for Fort Lauderdale).
j = A (for Albuquerque),
B (for Boston), or
C (for Cleveland).
 Transportation Model Example 1
Supply Constraints

XDA + XDB + XDC = 100 (Des Moines capacity)

XEA + XEB + XEC = 300 (Evansville capacity)
XFA + XFB + XFC = 300 (Fort Lauderdale capacity)

Demand Constraints

XDA + XEA + XFA = 300 (Albuquerque demand) and

XDB + XEB + XFB = 200 (Boston demand)
XDC + XEC + XFC = 200 (Cleveland demand)
 Example 2

Problem: How many tons of wheat to transport from each grain

elevator to each mill on a monthly basis in order to minimize the
total cost of transportation?
Data: Grain Elevator Supply Mill Demand
1. Kansas City 150 A. Chicago 200
2. Omaha 175 B. St. Louis 100
3. Des Moines 275 C. Cincinnati 300
Total 600 tons Total 600 tons

Transport Cost from Grain Elevator to Mill ($/ton)

Grain Elevator A. Chicago B. St. Louis C. Cincinnati
1. Kansas City $ 6 $ 8 $10
2. Omaha 7 11 11
3. Des Moines 4 5 12
 Example 2
Model Formulation
Minimize Z = 6x1A + 8x1B + 10x1C + 7x2A + 11x2B + 11x2C +
4x3A + 5x3B + 12x3C
subject to:
x1A + x1B + x1C = 150
x2A + x2B + x2C = 175
x3A + x3B + x3C = 275
x1A + x2A + x3A = 200
x1B + x2B + x3B = 100
x1C + x2C + x3C = 300
xij  0
xij = tons of wheat from each grain elevator, i, i = 1, 2, 3, to each
mill j, j = A,B,C
 Eexercise
Carlton Pharmateuticals
• Carlton Pharmaceuticals supplies drugs and other
medical supplies.

• It has three plants in: Cleveland, Detroit, Greensboro.

• It has four distribution centers in:

Boston, Richmond, Atlanta, St. Louis.

• Management at Carlton would like to ship cases of a

certain vaccine as economically as possible.
• Data
– Unit shipping cost, supply, and demand
To
From Boston Richmond Atlanta St. Louis Supply
Cleveland $35 30 40 32 1200
Detroit 37 40 42 25 1000
Greensboro 40 15 20 28 800
Demand 1100 400 750 750

1. Show the network

2. Develop the model
 Unbalanced transportation problem

• In an unbalanced transportation model, supply is greater than demand or demand is greater

than supply
• It is a more likely occurred

When demand is greater than supply

 One of the demand constraints will not be met because there is not enough total supply to meet
total demand. The demand constraints will be ≤

In our above example 2, if the demand at Cincinnati is increased from 300 tons to 350 tons, a
situation is created in which total demand is 650 tons and total supply is 600 tons.
• This will result in the following change in our linear programming model of this Problem

© 2002 Prentice-Hall, Inc Ch 5-16

 Unbalanced transportation model
The model is:
Minimize Z = 6x1A + 8x1B + 10x1C + 7x2A + 11x2B + 11x2C +
4x3A + 5x3B + 12x3C
subject to:
x1A + x1B + x1C = 150
x2A + x2B + x2C = 175
x3A + x3B + x3C = 275
x1A + x2A + x3A ≤ 200
x1B + x2B + x3B ≤ 100
x1C + x2C + x3C ≤ 350
xij  0

© 2002 Prentice-Hall, Inc Ch 5-17

 Balancing transportation problem: when
demand is greater than supply

Formulate linear programming model of the above

transportation problem
© 2002 Prentice-Hall, Inc Ch 5-18
 Unbalanced transportation model

When supply is greater than demand

If supply exceeds demand, then the supply constraints will be ≤ because
there is surplus.

In our above example 2, if the supply at Des Moines is increased from

275 tons to 300 tons, a situation is created in which total supply is 625
tons and total demand is 600 tons.

© 2002 Prentice-Hall, Inc Ch 5-19

 Unbalanced transportation model
Thus, the model will be:
Minimize Z = 6x1A + 8x1B + 10x1C + 7x2A + 11x2B + 11x2C + 4x3A +
5x3B + 12x3C
subject to:
x1A + x1B + x1C ≤ 150
x2A + x2B + x2C ≤175
x3A + x3B + x3C ≤ 300
x1A + x2A + x3A = 200
x1B + x2B + x3B =100
x1C + x2C + x3C = 350
xij  0

© 2002 Prentice-Hall, Inc Ch 5-20

 Balancing transportation problems
• If the demand exceeds supply, we introduce a dummy source (i.e.
a fictitious factory) which has that capacity.
• The amount shipped from this dummy source to a destination
represents the shortage quantity at that destination.
• Since the source does not exist, no shipping from the source will
occur, so the unit transportation costs can be set to zero.

• If supply exceeds demand then a dummy destination is added which

absorbs the surplus units. Any units shipped from a source to a
dummy destination represent a surplus at that source. In this case the
supply constraints will be =
• Since no shipping takes place, the unit transportation costs can be
set to zero

© 2002 Prentice-Hall, Inc Ch 5-21

 Solving transportation problem

 The transportation problem is solved in two phases:

•Phase I -- Obtaining an initial feasible solution

•Phase II -- Moving toward optimality

© 2002 Prentice-Hall, Inc Ch 5-22

 Solving transportation problem
• Transportation models do not start at the origin where all decision
values are zero; they must instead be given an initial feasible solution.
• Initial feasible solution determination methods include:
1. Northwest Corner Method
2. Minimum Cell Cost Method
3. Vogel’s Approximation Method
• Methods for solving the transportation problem include: Also called
methods of testing optimality
1. Stepping-Stone Method
2. Modified Distribution Method.

© 2002 Prentice-Hall, Inc Ch 5-23

 Initial feasible solution of Transportation
Model :Example
Problem: How many tons of wheat to transport from each grain
elevator to each mill on a monthly basis in order to minimize the
total cost of transportation?
Data: Grain Elevator Supply Mill Demand
1. Kansas City 150 A. Chicago 200
2. Omaha 175 B. St. Louis 100
3. Des Moines 275 C. Cincinnati 300
Total 600 tons Total 600 tons

Transport Cost from Grain Elevator to Mill ($/ton)

Grain Elevator A. Chicago B. St. Louis C. Cincinnati
1. Kansas City $ 6 $ 8 $10
2. Omaha 7 11 11
3. Des Moines 4 5 12
 1st : write in tableau Format
• Transportation problems are solved manually within a
tableau format.
• Each cell in a transportation tableau is analogous to a
decision variable that indicates the amount allocated
from a source to a destination.
• The supply and demand values along the outside rim of a
tableau are called rim values.

© 2002 Prentice-Hall, Inc Ch 5-25

Tableau form

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 1. Northwest corner method

• Steps:
1. Allocate as much as possible to the cell in the upper left-
hand corner, subject to the supply and demand
conditions.
2. Allocate as much as possible to the next adjacent
feasible cell.
3. Repeat step 2 until all rim requirements are met.

© 2002 Prentice-Hall, Inc Ch 5-27

 The Northwest Corner Method

© 2002 Prentice-Hall, Inc Ch 5-28

 The Northwest Corner Method

• The initial solution is complete when all rim requirements

are satisfied.
• Transportation cost is computed by evaluating the
objective function:
• Z = $6x1A + 8x1B + 10x1C + 7x2A + 11x2B + 11x2C + 4x3A +
5x3B + 12x3C
• Z = 6(150) + 8(0) + 10(0) + 7(50) + 11(100) + 11(25) +
4(0) + 5(0) + !2(275)
= $5,925

© 2002 Prentice-Hall, Inc Ch 5-29

 The Minimum Cell Cost Method

Step:
1. Allocate as much as possible to the feasible cell with the
minimum transportation cost, and adjust the rim
requirements.
2. Repeat step 1 until all rim requirements have been met.
The minimum cell cost method will provide a solution
with a lower cost than the northwest corner solution
because it considers cost in the allocation process.

© 2002 Prentice-Hall, Inc Ch 5-30

 The Minimum Cell Cost Method

The complete initial minimum cell cost solution; total

cost = $4,550.
© 2002 Prentice-Hall, Inc Ch 5-31
 Vogel’s Approximation Method (VAM)

•Begin with computing each row and column a penalty.

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

© 2002 Prentice-Hall, Inc Ch 5-32

 Step 1: Compute the penalties.

© 2002 Prentice-Hall, Inc Ch 5-33

 Step 2: Identify the largest penalty and allocates as
much as possible to the minimum cost cell in the row or
column with the largest penalty cost

© 2002 Prentice-Hall, Inc Ch 5-34

 Vogel’s Approximation Method (VAM)

- After each VAM cell allocation, all row and column penalty costs are recomputed.

The Second
VAM
Allocation

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 Vogel’s Approximation Method (VAM)

© 2002 Prentice-Hall, Inc Ch 5-36

 Vogel’s Approximation Method (VAM)

The initial VAM solution; total cost = $5,125

VAM and minimum cell cost methods both provide better initial solutions than
does the northwest corner method.

The Initial VAM

Solution

© 2002 Prentice-Hall, Inc Ch 5-37

 Vogel’s Approximation Method (VAM)
Summary of Steps

1. Determine the penalty cost for each row and column.

2. Select the row or column with the highest penalty cost.
3. Allocate as much as possible to the feasible cell with the
lowest transportation cost in the row or column with the
highest penalty cost.
4. Repeat steps 1, 2, and 3 until all rim requirements have been
met.
 In addition to the initial feasible solution, it gives more
information about the penalties that otherwise we incur

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 Exercise
W1 W2 W3 W4 Supply

F1 10 0 20 11 20

F2 12 7 9 20 25

F3 0 14 16 18 15

Demand 10 15 15 20
Find the initial basic feasible solution using:
1. Northwest corner method =640
2. least cost method=480
3. VAM method =480
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 Exercise
• A company has factories at A, B and C which supply
warehouses at D, E and F. Weekly factory capacities are 200,
160 and 90 units respectively. Weekly warehouse requirements
(demands) are 180, 120 and 150 units respectively. Unit
shipping costs are as follows:

• Find the initial feasible solution using northwest corner

method, least cost method, and VAM method

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 Exercise

• What is the initial feasible solution of the above example

using west-corner method, least cost method, and Vogel’s
approximation method

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 When demand is not equal to supply

Find the initial feasible solution of the following transportation

problem using north west corner method, least cost method, and
VAM Method

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When demand is not equal to supply

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 Exercise
• Formulate the transportation model of the following problem
and the initial basic feasible solution using Northwest, least
cost, and VAM methods

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 Summery of basic feasible solution

Basic feasible solution to a transportation problem

satisfies the following conditions:
•The row-column( supply-demand )conditions are
satisfied
•The non-negativity constraints are satisfied
•The allocations are independent and do not form a
loop
•There are m+n-1 allocations

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 Methods for solving the transportation problem:
optimization

• Also called testing initial feasible solution for optimality

• We can proceed to find out whether initial solution is optimal
or not
• The following are two methods of testing
1. Stepping-Stone Method and
2. Modified Distribution Method.

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 The Stepping-Stone Solution Method

The stepping-stone method determines if there is a cell with no

allocation that would reduce cost if used.
Step 1: proceed row by row and select a water square( a cell with out
any allocation). A cell with allocation is a stone square
Step 2: form a closed path starting from selected water square via
stone square and then back to the same water square
Step 3: assign alternative plus and minus sign on the closed path
starting with a plus sign on the water square
Step 4: calculate net cost change for the path. The net cost change is
obtained by summing up the unit cost of each cell. Evaluate the
solution for optimality test by observing the net cost change

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 The Stepping-Stone Solution Method

• Negative sign indicates a cost reduction can be made

by making the change
• Positive sign indicates an increase in cost if the
change is made
• if all the sign are positive, then that means that the
optimal solution has been reached
• If more than one square has a negative sign then the
water square with the largest negative net cost change
is selected for quicker solution

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 Example 1
• Solve the following using Stepping stone method. The initial
solution used as a starting point in this problem is the
minimum cell cost method solution

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 Example 1--------

1A →1B → 3B → 3A:
6 -8 +5 -4 = -1

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Example 1----

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 Example 1

The answer is 4525

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 Exercise1

• Find initial feasible solution using Northwest cost method and test
optimality using steeping stone method

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 Exercise
• Find the initial basic feasible solution of the following
transportation problem and test the value for optimality

W1 W2 W3 W4 Supply

F1 10 0 20 11 20

F2 12 7 9 20 25

F3 0 14 16 18 15

Demand 10 15 15 20

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 The Modified Distribution Method (MODI)

• MODI is a modified version of the stepping-stone method in which math

equations replace the stepping-stone paths

• In the table, the extra left-hand column with the ui symbols and the extra
top row with the vj symbols represent values that must be computed.

• Computed for all cells with allocations: ui + vj = cij = unit transportation

cost for cell ij.

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 MODI method example

The minimum cell method was used to find the initial basic
feasible solution
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 MODI method example

Formulas for cells containing

allocations:
x1B: u1 + vB = 8
x1C: u1 + vC = 10
x2C: u2 + vC = 11
x3A: u3 + vA = 4
x3B: u3 + vB = 5
Five equations with 6 unknowns,
therefore let u1 = 0 and solve to obtain:
vB = 8, vC = 10, u2 = 1, u3 = -3, vA= 7

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 MODI example

- Use following to evaluate all empty cells:

cij - ui - vj = kij
where kij equals the cost increase or
decrease that would occur by allocating to a
cell.
- For the empty cells in the previous Table:
x1A: k1A = c1A - u1 - vA = 6 - 0 - 7 = -1
x2A: k2A = c2A - u2 - vA = 7 - 1 - 7 = -1
x2B: k2B = c2B - u2 - vB = 11- 1 - 8 = +2
x3C: k3C = c3C - u3 -vC = 12 - (-3) - 10 = +5

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 The Modified Distribution Method (MOD)

After each allocation to an empty cell, the u i and vj values must be recomputed.
Again as follows cij - ui - vj = kij: empty cell
- Formulas for cells containing
allocations: - Use following to evaluate all empty cells:
cij - ui - vj = kij
x1B: u1 + vA = 6
where kij equals the cost increase or decrease
x1C: u1 + vC = 10 that would occur by allocating to a cell.
• For the empty cells in the previous Table :
x2C: u2 + vC = 11
x1B: k1B = c1A - u1 - vB = 8 - 0 - 7 = 1
x3A: u3 + vA = 4 x2A: k2A = c2A - u2 - vA = 7 - 1 - 6 = 1

x3B: u3 + vB = 5 x2B: k2B = c2B - u2 - vB = 11- 1 - 7 = +3

x3C: k3C = c3C - u3 -vC = 12 - (-2) - 10 = +4
Five equations with 6 unknowns,
therefore let u1 = 0 and solve to obtain: All result of cij - ui - vj are positive and no
need of further improvement. Therefore , the
vB = 7, vC = 10, u2 = 1, u3 = -2, vA= 6 optimum solution is in the next slide

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 MODI----

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 Exercise1

• Find initial feasible solution using Northwest cost method and test
optimality using UV method

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 Exercise
The ruck Rental firm has accumulated extra trucks at three of
its truck leasing outlets, as shown in the following table:
The firm also has four outlets with shortages of rental trucks, as follows:

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 Exercise continue---

The firm wants to transfer trucks from those outlets with extras to those with
shortages at the minimum total cost. The following costs of transporting these
trucks from city to city have been
determined:

To( cost in Birr )

From A B C D
1 70 80 45 90
2 120 70 30 75
3 110 60 70 80
a.Find the initial basic feasible solution using list cost method
b.Find the optimal solution using stepping stone and UV methods

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