Transportation Problem

Introduction:
Assumption: The model assumes that the shipping cost is proportional to the number of
units shipped on a given route.
Applications: This model can be extended to the other areas such inventory control,
employment scheduling, personnel assignment.
Definition and the mathematical model of the transportation problem.

a1 Sources Dest, b1
C11:x11
1 1

a2 2 b2
2

am m n bn
Cmn:xmn
Mathematical Model.
m n

Minimize Z= c x
ij ij
i 1 j 1

Subject to, n
 xij  ai , i  1,2,..., m
j 1
m
 xij  b j , j  1,2,..., n
i 1

x  0 i and j
ij

a
Where i =Quantity of commodity available at origin I
b =Quantity of commodity needed at destination j.
j
x =Quantity transported from origin I to destination j
ij
c =Cost of transporting one unit of commodity from origin I to
ij
destination j.
When total supply is equal to the total demand then the above in
equations holds as equality.
Mathematical Model.
m n

Minimize Z= c x
ij ij
i 1 j 1

Subject to, n
 xij  ai , i  1,2,..., m
j 1
m
 xij  b j , j  1,2,..., n
i 1

x  0 i and j
ij

a
Where i =Quantity of commodity available at origin I
b =Quantity of commodity needed at destination j.
j
x =Quantity transported from origin I to destination j
ij
c =Cost of transporting one unit of commodity from origin I to
ij
destination j.
When total supply is equal to the total demand then the above in
equations holds as equality.
A necessary and sufficient condition for the existence of a feasible
solution to a transportation problem is that

m n
 a   b
i 1 i j 1 j
 Unbalanced Condition:

Total Supply > Total Demand

Add dummy destination.
Capacity =surplus supply
Unit Transportation cost at the dummy destination center are zero.

 Total Supply < Total Demand

 Add a dummy origin
Capacity =excess demand
Unit transportation costs at the dummy origin are zero.
Exercise Q1 Three refineries with daily capacities of 6, 5, and 8 million
gallons respectively, supply three distribution areas with daily demands of
4, 8 and 7 million gallons respectively. Gasoline is transported to the three
distribution areas through a network of pipelines. The transportation cost is
10 cents per 1000 gallons per pipeline mile. Table 5.7 gives the mileage
between the refineries and the distribution areas. Refinery 1 is not connected
to distribution area 3.
TABLE 1________________________________________
Distribution area
1 2 3
_______________________________
1 120 180 __
Refinery 2 300 100 80
3 200 250 120__
(a) Construct the associated transportation model.
(b)    Use TORA to determine the optimum shipping schedule     
in the network.
2. In Part (a), suppose that the capacity of refinery 3 is 6 million gallons only and
that distribution area 1 must receive all its demand. Additionally, any
shortages at areas 2 and 3 will incur a penalty of 5 cents per gallon.
(a)    Formulate the problem as a transportation model.
(b)   Solve the resulting model  by using TORA and determine the optimum
shipping schedule.  
In part (b), suppose that the daily demand at area 3 drops to 4 million gallons.
Surplus production at refineries 1 and 2 is diverted to other distribution areas
by truck. The transportation costs per 100 gallons is $1.50 form refinery 1
and $2.20 from refinery 2. Refinery 3 can divert its surplus production to
other chemical processes within the plant.
(a) Formulate the problem as a transportation model.
(b) Determine the optimum shipping schedule using TORA.  
Mathematical formulation:
Minimize Z= 12 x11  18x12  10000x13  30 x21  10 x22  8 x 23 20 x31  25 x32  12 x33
Subject to, x11  x12  x13  6,
x21  x22  x23  5,
x31  x32  x33  8,
x11  x21  x31  4,
x12  x22  x32  8,
x13  x23  x33  7,
xij  0, i, j

Solution obtained by TORA is

x11  4, x12  2, x13  0, x21  0, x22  0, x23  0,
x31  0, x32  1, x33  7

Objective function
value=243.0
PRODUCTION- INVENTORY CONTROL

• No setup cost is incurred in any period.

• No shortages is allowed.
• Unit production cost function in any period is either
constant or has increasing marginal costs.
• Unit holding cost in any period is constant.
 METHODOLOGY
• The optimal solution is obtained in one
pass by starting from column 1 and
moving one column at a time toward
surplus column, the demand is satisfied
using the cheapest route in that column.
 Validity
• S.M. Johnson, Sequential Production
Planning over Time at Minimum Cost.
Management Science, Vol 3, pp 435-437,
1957.
Production Scheduling and Inventory Control
Problems

The Transportation model can be applied to the problem of scheduling

production and controlling inventory over several periods.
 Introduction
 Model Construction and Solution Techniques
 
 Exercise Q2.
  The demand for a special small engine over the next five quarters is
200, 150, 300, 250, and 400 units. The manufacturer supplying the
engine has different production capacities estimated at 180, 230, 430,
300, and 300 for five quarters. Back-ordering is not allowed, but the
manufacturer may use overtime to fill the immediate demand, if
necessary. The overtime capacity for each period is half the regular
capacity. The production costs per unit for the five periods are $100,
$96, $116, $102, and $106, respectively. The overtime production cost
per engine is 50% higher than the regular production cost. If an engine
is produced now for use in later periods, an additional storage cost of $4
per engine per period is incurred. Formulate the problem as a
transportation model. Use TORA to determine the optimum number of
engine to be produced during regular time and overtime of each period.
 Q1 Q2 Q3 Q4 Q5

Q1 100 104 108 112 116 180

O1 150 154 158 162 166 90
Q2 M 96 100 104 108 230
O2 M 144 148 152 156 115
Q3 M M 116 120 124 430
O3 M M 174 178 182 215
Q4 M M M 102 106 300
O4 M M M 153 157 150
Q5 M M M M 106 300
O5 M M M M 159 150
200 150 300 250 400
Period Production Schedule
Regular 1 Produce 180 units for period 1
Overtime 1 Produce 20 units for period 1
Regular 2 Produce 150 units for period 2,
80 units for period 3.
Regular 3 Produce 220 units for period 3 and 50 units for

period 5
Regular 4 250 units for period 4 and 50 units for period 5
Regular 5 Produce 300 units for period 5
 Metalco Company- Q3

• Metalco produces draft deflectors for use in home

fireplaces during the months of December to March. The
demand starts slow, peaks in the middle of the season,
and tapers off towards the end. Because of the popularity
of the product, Metalco may use overtime to satisfy the
demand. The following table provides the production
capacities and the demands of the four winter months.
 Contd. Metalco
• ______________________________________________________________________________
• Capacity
• _____________________________________
• Month Regular ( units) Overtime (units) Demand (units)
• ______________________________________________________________________________
• 1 90 50 100
• 2 100 60 190
• 3 120 80 210
• 4 110 70 160
• ______________________________________________________________________________
• Unit production cost in any period is $6 during regular time and $9 during overtime . Holding cost
per unit per month is $0.10.
 100 190 210 160 20

Table
1 2 3 4 Surplus
   

R1 6 6.1 6.2 6.3 0 90

 
O1 9 9.1 9.2 9.3 0
50

 
R2 M 6 6.1 6.2 0
 

10
O2 M 9 9.1 9.2 0
0

 
R3 M M 6 6.1 0
60

 
O3 M M 9 9.1 0
12
0
R4 M M M 6 6.1  

80
O4 M M M 9 9.1  

11
0

70
 Final Production Schedule
• Period Production Schedule
• Regular 1: Produce 90 units for period 1
• Overtime 1: Produce 10 units for period 1 , 30 for 2 ,
and 10 for 3.
• Regular 2: Produce 100 units for period 2.
• Overtime 2: Produce 60 units for period 2.
• Regular 3: Produce 120 units for period 3.
• Overtime 3: Produce 80 units for period 3.
• Regular 4: Produce 110 units for period 4.
• Overtime 4: Produce 50 units for period 4, with 20 units
idle capacity.
 Transshipment Problems

Introduction:
The transshipment model is an extension of the classical transportation model. The transshipment
model recognizes that in real life it may be cheaper to ship through intermediate or transient nodes
before reaching the final destination.
Definitions:
Supply point: It is a point that can send goods to another point but cannot receive goods from any
other point.
Demand point: It is a point that can receive goods from other points but cannot send goods to any
other point.
Transshipment point: Is a point that can both receive goods from other points and send goods to
other points.
Examples: Intermediate warehouses between plants and customers, connecting airports between
the starting point of a trip and the final destination, satellites that act as a relay station between a
source of a transmitted TV signal and the point of final reception of that signal.
 Transshipment Problem
Application Q4

Widgetco manufactures widgets at two factories one in Memphis and one in Denver.
The Memphis factory can produce up to 150 widgets per day, and the Denver factory
can produce up to 200 widgets per day. Widgets are supplied by air to customers in
Los Angeles and Boston. The customers in each city requires 130 widgets per day.
Because of the deregulation of air fairs, Widgetco believes that it may be cheaper to
first fly some widgets to New York or Chicago and then fly them to their final
destinations. The cost of flying a widget are given in the following table. Widgetco
wants to minimize the total cost of shipping the required widgets to its customers.
 
 Memphis Denver NY Chicago LA Boston

Memphis $0 - $8 $13 $25 $28

Denver - $0 $15 $12 $26 $25

NewYork - - $0 $6 $16 $17

Chicago - - $6 $0 $14 $16

L.A - - - - $0 -

Boston - - - - - $0
 25

8 16
Memphis N.Y LA

28 17
6

26 15 13 6 14

Denver Chicago Boston

12 16

25
Supply at a pure supply node = Original supply
Supply at a transshipment node = Original supply + buffer
Demand at a demand node = Original demand
Demand at a transshipment node = Original demand + buffer.
The buffer amount should be sufficiently large to allow the entire original supply (or
demand) units to pass through any of the transshipment nodes. Let B is the desired
buffer amount, then B= total supply (or total demand)

NY Chicago L.A Boston Dummy Supply

Memphis 8 13 25 28 0 150

Denver 15 12 26 25 0 200

New York 0 6 16 17 0 350

Chicago 6 0 14 16 0 350

Demand 350 350 130 130 90

Solution by using the transportation algorithms

Memphis 130 NY 130

LA

Denver Chicago Boston

130

With a cost of $6370.00

Mathematical formulation of the transshipment problem.
Minimize Z= 8 x11  13x12  25 x13  28 x14  15x21  12 x22  26 x23  25 x24
 0.x31  6 x32  16 x33  17 x34  6 x41  0.x42  14 x43  16 x44

Subject to, x11  x12  x13  x14  150,

x21  x22  x23  x24  200,
x31  x32  x33  x34  350,
x41  x42  x43  x44  350,
x11  x21  x31  x41  350,
x12  x22  x32  x42  350,
x13  x23  x33  x43  130,
x14  x24  x34  x44  130,
xij  0, i, j.
 Application-Q5
Two automobile plants P1 and P2 are linked to three dealers
D1, D2 and D3 by way of two distribution centers T1 and
T2 according to the network shown in figure . The supply
amounts at plants P1 and P2 are 1000 and 1200 cars and the
demand amounts at dealers D1, D2, D3 are 800, 900 and
500 cars. The shipping cost per car is given in the network.
 800
D1

8 5
3
1000 P1 T1 6
4 900
D2
7

3
2 4
1200 5 T2 9
P2 500
D3
 Final Solution
• P1-T2 1000
• T2-D2 1000
• D2-D3 500
• P2-T1 1200
• T1-D1 800
• T1-D2 400