CHAPTER-3

TRANSPORTATION MODELS
 Chapter’s objectives
In the previous chapters, we have discussed about linear programming,
which is more general. In this chapter, we will discuss about special types
of linear programming models called Transportation Models
Up on completion of this section, you will be able to:
 explain transportation models
 identify application areas of transportation models
 formulate LP model for transportation problems
 describe methods of finding initial feasible solution (Using NWCM, LCM
and VAM)
 check for optimality of transportation model using stepping stone and
MODI techniques.
 elucidate special cases in transportation models
 Introduction

• Though it is possible to solve the LP and Transportation model using simplex

method, the process would result in rather large simplex tableaus and
numerous simplex iterations.
• Because of the unique characteristics of each problem, however, alternative
solutions methods requiring considerably less mathematical computation than
the simplex method have been developed.
• Transportation problem deals with the distribution of goods from several
points of supplies (sources) to a number of points of demands (destinations).
• The purpose of using an LP model for transportation problems is to minimize
transportation costs, taking into account the origin supplies, the destination
demands, and the transportation costs.
• Examples of transportation problems include shipments from warehouses to
retail stores, shipment from factories to warehouses, shipments between
departments within a company, and production scheduling.
 Introduction Cont’d
Uses of transportation techniques:
• Reduce distribution or transportation cost
• Improve competitiveness of product
• Assist proper location of warehouses, new factories or plants being
planned.
• Close down warehouses which are found costly and uneconomical.
The objective of transportation problem is to:
1) identify the optimal shipping routes-minimum cost route
2) identify the maximum amount that can be shipped over the optimum
route
3) determine the total transformation cost or the profit of transportation
 Formulating the Transportation Model

•A transportation problem typically involves a set of sending locations (origins), and a set
of receiving locations (destinations). In order to develop a model of a transportation
problem, it is necessary to have the following information:
a. Supply quantity (capacity) of each origin.
b. Demand quantity of each destination.
c. Unit transportation cost for each origin-destination route.
Assumptions
 All goods be homogeneous, so that any origin is capable of supplying any destination,
 Transportation costs are a direct linear function of the quantity shipped over any route.
 the total quantity available is equal to the total demand (with or without modification).
 The solution algorithm to a transportation problem: Steps

Step 1: Formulate the problem and set up in the matrix form

•The objective function is the total transportation cost and the constraints are the supply and demand available at each source
and destination respectively.

Step 2: Obtain an initial basic feasible solution

There are 3 methods to find the initial feasible solution.

1. North-West Corner Method (NWCM)

2. Least Cost Method (LCM)/ An Intuitive Method
3. Vogel’s Approximation Method (VAM) /Penalty Method

The initial solution obtained by any of the three methods must satisfy the following condition:

i. The solution must be feasible i.e.: It must satisfy all the supply and demand constraints
ii. The number of positive allocations must equal to m+n-1, where m=the number of rows (or origins or supply centers) and n=
the number of columns(or destination centers or demand centers)

Step 3: Test the initial solution for optimality

• If the current solution is optimal, then stop. Otherwise, determine the new improved solution.

Step 4: Repeat step 3 until an optimal solution is reached

 Evaluating a Solution for Optimality

The test for optimality for a feasible solution involves a cost

evaluation of empty cells (i.e., routes to which no units have been
allocated) to see if an improved solution is possible. We shall
consider two methods for cell evaluation:
 The Stepping-stone method
 The MODI method
The stepping-stone method involves a good deal of more effort than
the MODI method. However, it provides an intuitive understanding of
the evaluation process. Moreover, when a solution is not optimal, the
distribution plan must be revised by reallocating units into and out of
various cells, and only the stepping-stone method can be used for the
reallocation.
 The Stepping-stone Method
The Stepping-stone method involves tracing a series of closed paths in the transportation table, using one such path
for each empty cell. The path represents a shift of one unit into an empty cell, and it enables the manager or analyst
to answer a “what-if” question: What impact on total cost would there be if one unit were shifted into an unused
route? The result is a cost change per unit shifted into a cell. If the shift would result in a cost savings, the stepping-
stone path also can be used to determine the maximum number of units that can be shifted into the empty cell, as
well as modifications to other completed cells needed to compensate for the shift into the previously unused cell.
Reconsider the initial feasible solution we found using the northwest-corner method. Only the unoccupied cells
need to be evaluated because the question at this point is not how many units to allocate to a particular route but
only if converting a cell from zero units to nonzero (a positive integer) would decrease or increase total costs. They
must be evaluated one at a time, but in no particular order.
Rules for tracing Stepping-stone paths:
i. All unoccupied cells must be evaluated. Evaluate cells one at a time.
ii. Except for the cell being evaluated, only add or subtract in occupied cells. (It is permissible to skip over
unoccupied cells to find an occupied cell from which the path can continue.)
iii. A path will consist of only horizontal and vertical moves, starting and ending with the empty cell that is being
evaluated.
iv. Alter + and – signs, beginning with a + sign in the cell being evaluated.
Note: that it is not necessary to actually alter the quantities in the various cells to reflect the one-unit change, the +
and – signs suffice.
 The MODI Method

•The MODI (Modified Distribution) method of evaluating a transportation solution for optimality involves the use of index
numbers that are established for the rows and columns. These are based on the unit costs of the occupied cells. The index
numbers can be used to obtain the cell evaluations for empty cells without the use of stepping-stone paths.
•There is one index number for each column and one for each row. These can be conveniently displayed along the left and
upper edges of a matrix. The index numbers are determined in such a way that for any occupied cell the sum of the row
index and the column index equals the cell’s unit transportation cost:
Row index + Column index = Cell cost

•The index numbers are determined sequentially in a manner dictated by the position of occupied cells. The process always
begins by assigning a value of zero as the index number of row 1.
•The method will be illustrated by developing index numbers for the initial feasible solution for the Harley problem generated
by the northwest-corner method. We begin assigning a value of zero for row 1. Once a row index has been established, it
will enable us to compute column index numbers for all occupied cells in that row. Similarly, once a column index number
has been determined, index numbers for all rows corresponding to occupied cells in that column can be determined. The
complete set of row and column index numbers is shown in the following table.
The cell evaluations (improvement potentials) for each of the unoccupied cells are determined using the relationship:
Cell evaluation=Cell cost -Row index-Column index
 Example

Example
Let’s consider an example. Harley’s Sand and Gravel Pit has contracted to provide
topsoil for three residential housing developments. Topsoil can be supplied from
three different “farms” as follows:
Farm Weekly capacity (cubic yards)
A 100
B 200
C 200
Demand for the topsoil generated by the construction projects is:
Project Weekly demand(cubic yards)
1 50
2 150
3 300
The manager of the sand and gravel pit has estimated the cost per cubic
yard to ship over each of the possible routes:
Cost per cubic yard to
From Project #1 Project #2 Project #3
Farm A Birr4 Birr 2 Birr 8
Farm B 5 1 9
Farm C 7 6 3

This constitutes the information needed to solve the problem.

Step 1: Formulate the problem and set up in the matrix form

Origin Project Project Project Factory

(Supply) 1 2 3 Capacity =i
Farm A Br.4 2 8
  100
 
5 1 9
Farm B   200
 
7 6 3
Farm C 200
 
Requirements of the
Warehouses
50 150 300  
( Units of demand)
 Special Issues

There are a number of special issues in relation to the transportation

model. They are:
i. Determining if there are alternate optimal solutions.
ii. Defining and handling degeneracy (too few occupied cells to permit
evaluation of a solution).
iii. Avoiding unacceptable or prohibited route assignments.
iv. Dealing with problems in which supply and demand are not equal.
v. Solving maximization problems.
 .
Alternate Optimal Solutions
Sometimes, transportation problems have multiple optimal solutions. In
such instances, it can be useful for a manager to be aware of alternate
solutions, because this gives the manager an option of bringing non-
quantitative considerations into the decision.
In the case of the transportation problem, the existence of an alternate
solution is signaled by an empty cell’s evaluation equal to zero. We can
find out what that alternate solution is by reallocating the maximum
number of units possible around the steppingstone path for that cell.
 .
Degeneracy
A solution is degenerate if the number of occupied cells is less than the number of rows plus the
number of columns minus one. i.e., there are too few occupied cells to enable all the empty cells to
be evaluated. In the case of the stepping-stone method, this means that there will be at least one
empty cell for which an evaluation path cannot be constructed. For the MODI method, it means that
it will be impossible to determine all of the row and column index numbers. Obviously, some
modification has to be made to determine if such a degenerate solution is optimal. The modification
is to treat some of the empty cells as occupied cells. This is accomplished by placing a delta (∆) in
one of the empty cells. The delta represents an extremely small quantity (e.g., 0.001 unit); it is so
small that supply and demand for the row and column involved will be unaffected even without
modifying other quantities in the row or column, and so small that total cost will not change.
The purpose of the delta is to enable evaluation of the remaining empty cells. The choice of location
for the delta can be somewhat tricky: some empty cells may be unsuitable if they do not enable
evaluations of the remaining empty cells. Moreover, the delta cannot be placed in a cell which later
turns out to be in a negative position of a cell path involved in reallocation because delta will be the
“smallest quantity in a negative position” and shifting that minute quantity around the cell path will
leave the solution virtually unchanged. Consequently, a certain amount of trial and error may be
necessary before a satisfactory location can be identified for delta.
 .
Unacceptable Routes
In some cases, an origin-destination combination may be unacceptable.
This may be due to weather factors, equipment breakdowns, labor
problems, or skill requirements that either prohibit, or make undesirable,
certain combinations (routes).
In order to prevent that route from appearing in the final solution (as it
originally did), the manager could assign a unit cost to that cell that was
large enough to make that route uneconomical and, hence, prohibit its
occurrence. One rule of thumb would be to assign a cost that is 10 times
the largest cost in the table (or a very big +M). Then, this revised problem
could be solved using either of the methods we have discussed earlier.
Note that the prohibited route may appear in a non-optimal solution, but
it will be eliminated by the time the optimal solution is reached.
 .
Unequal Supply and Demand
Up to this point, examples have involved cases in which supply and
demand were equal. As you might guess, there are situations in which the
two are not equal. When such a situation is encountered, it is necessary to
modify the original problem so that supply and demand are equal. This is
accomplished by adding either a dummy column or a dummy row; a
dummy row is added if supply is less than demand and a dummy column
is added if demand is less than supply. The dummy is assigned unit costs
of zero for each cell, and it is given a supply (if a row) or a demand (if a
column) equal to the difference between supply and demand. Quantities
in dummy routes in the optimal solution are not shipped. Rather, they
serve to indicate which supplier will hold the excess supply, and how
much, or which destination will not receive its total demand, and how
much it will be short.
 .
Maximization
• Some transportation type problems concern profits or revenues rather than
costs. In such cases, the objective is to maximize rather than to minimize.
Such problems can be handled by adding one additional step at the start:
Identify the cell with the largest profit and subtract all the other cell profits
from that value. Then replace the cell profits with the resulting values.
These values reflect the opportunity costs that would be incurred by using
routes with unit profits that are less than the largest unit profit. Replace the
original unit profits with these opportunity cost solutions. This will be
identical to maximizing the total profit.
• The remainder of the steps for developing an initial feasible solution,
evaluation of empty cells, and reallocation are identical to those used for
cost minimization. When the optimal distribution plan has been identified,
use the original cell values (i.e., profits) to compute the total profit for that
plan.
END