DEBREBIRHAN UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
MASTERS OF BUSINESS ADMINISTRATION

CHAPTER THREE
TRANSPORTATION AND ASSIGNMENT
PROBLEM
3.1 TRANSPORTATION PROBLEM
 A transportation problem basically deals with the problem,
which aims to find the best way to fulfill the demand of n
demand points using the capacities of m supply points.
 While trying to find the best way, generally a variable cost
of shipping the product from one supply point to a demand
point or a similar constraint should be taken into
consideration.
 The transportation model is usually applied to distribution
type problems in which supplies of goods that are held at
various location are to be distributed to other receiving
locations.
 Transportation problem deals with the distribution of goods
from several points of supplies (sources) to a number of
points of demands (destinations). Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
 Cost of product consists of production cost and
distribution cost.
 Cost of product = production cost + distribution cost
 Distribution cost consists of mainly the transportation cost
of items from its production (manufacturing) center to the
warehouses.
 Transportation techniques are designed to minimize the
distribution costs
 Example of transportation problem includes; shipment
from warehouse to retail stores, shipment from factories to
warehouse and shipment between departments within a
company.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

Characteristics of Transportation Problem :

1. A limited supply of commodity is available at certain sources or
origins.
2. There is a demand for the commodity at several destinations
3. The quantities of supply at each source and the demand at each
destination are constant.
4. The shipping or transportation costs per unit from each source to
each destination are assumed to be constant.
5. No shipments are allowed between sources or between
destinations. All supply and demand quantities are given in whole
number or integers.
6. The problem is to determine how many units shipped from each
source to each destination so that all demands are satisfied at the
minimum total shipping costs.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Uses of transportation techniques:
1. Reduce distribution or transportation cost
2. Improve competitiveness of product
3. Assist proper location of warehouses
4. Assist proper location of new factories or plants being
planned.
5. Close down warehouses which are found costly and
uneconomical.
The objective of transportation problem is:
6. To identify the optimal shipping routes-minimum cost route
7. To identify the maximum amount that can be shipped over
the optimum route
8. To determine the total transformation cost or the profit

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

The Transportation Method

 The solution algorithm to a transportation problem may
be summarized into the following steps:
Step 1:Formulate the problem and set up in the matrix
form
The formulation of the problem is similar to the linear
programming. The objective function is the total
transportation cost and the constraints are the supply and
demand available at each source and destination
respectively.

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

 The necessary information to develop the model includes;

 Supply quantity (capacity) of each origin
 Demand quantity of each distention
 Unit transportation cost for each origin – destination route.
Assumptions:
 All goods should be homogeneous. i.e., any origin can supply
to any destination
 Transportation costs are a direct linear function of the
quantity shipped over any route.
 The supply quantity of the origin is equal to the demand
quantity of the destination.

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Step 2: Obtain an initial basic feasible solution
 North-West Corner Method (NWCM)
 Least Cost Method (LCM)
 Vogel’s Approximation Method (VAM)
 The initial solution obtained by any of the three methods must
satisfy the following condition:
The solution must be feasible i.e.: It must satisfy all the supply
and demand constraints
 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)
 The number of occupied cells < m+n-1=> degenerate solution
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 Haile Y (PhD)
 3.1 TRANSPORTATION PROBLEM
 Example 1; a firm imports and supplies steel have three warehouse and three retail
shops spread in different location. The weekly capacity of the warehouse is given
bellow.
Warehouses Weekly capacity (in tone)
A 50
B 15
C 55
Demand for steel in three stores is given bellow
Retail shops Weekly demand (in tone)
I 25
II 50

 III
The manager of 45the firm has estimated the cost per ton of steel to ship over each
of the possible route. Required:
Cost per ton i. Express the following
transportation problem as
Warehouses RS I RS II RS II
an LPP
A 20 15 ii. Develop a transportation
B 9 11 4 model and findHaile
theY (PhD)
minimum cost.
3.1 TRANSPORTATION PROBLEM
• Let xij =The amount of commodity to be transported form source i (i =A,
B,C ) to destination j( j= i,ii,iii).
• Then the objective function of the problem (minimization of the total
transportation cost) can be formulated as:
MinZ = 12xAI +20xAII + 15xAII
9xBI +11xBII +4xBIII
20xCI+14xCII +8xCIII
Subject to the constraints
a. Supply constraints:
xAI +xAII +xAIII =50 W1 supply constraint
xBI + xBII + xBIII=15 W2 supply constraint
xCI +xCII +xCIII = 55 W3 supply constraint
b. Demand constraints:
xAI + xBI + xCI =25 S1 demand constraint
xAII + xBII + xCII = 50 S2 demand constraint
xAIII + xBIII +xCIII = 45 S3 demand constraint Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
In the above LPP, there are m x n = 3x3 =9 decision variables & m + n = 3+3 =6
constraints. Thus, if this problem is solved by the simplex method, then it may take
considerable computational time.
ii. The network representation of the transportation LPP is called Net work flow

Origin Destination centers

(Sources of Supply) (Point of demand centers)

12
W1 50 S1 25
20
15
9

W2 15 11 S2 55
4

S3 45
20 14
8
W3 55

This LPP has 9 shipping routes. The objective is to identify the minimum cost route
(Least cost route). Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

Transportation tableau
 A transportation problem is specified by the supply, the
demand, and the shipping costs. So the relevant data can
be summarized in a transportation tableau.
 The transportation tableau implicitly expresses the supply
and demand constraints and the shipping cost between
each demand and supply point.
 Transportation model; the origins are listed down the left
side across table and their respective supply listed down in
the right side of the table; the destination are listed across
the top of the table and their respective demand are listed
across the bottom of the table; and the unit costs are
shown in the upper right hand corner at each cell Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

Transportation tableau
from RSI RSII RSIII SS
to 12 20 15
50
WHA
9 11 4
15
WHB
20 14 8
55
WHC

DD 25 50 45

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

 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

14
 3.1 TRANSPORTATION PROBLEM
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
where xij = tons of wheat
from each grain elevator,
i, i = 1, 2, 3, to each mill j,
j = A,B,C Network of transportation routes for wheat shipments

15
3.1 TRANSPORTATION PROBLEM

The Transportation
Tableau

16
3.1 TRANSPORTATION PROBLEM
Finding Basic Feasible Solution for TP
 Unlike other Linear Programming problems, a balanced TP
with m supply points and n demand points is easier to solve,
although it has m + n equality constraints. The reason for that
is, if a set of decision variables (xij’s) satisfy all but one
constraint, the values for xij’s will satisfy that remaining
constraint automatically.
i. The north-west corner method (NWCM)
 This method does not take into account the cost of
transportation on any route of transportation.
 The NWCM gets its name because the starting point for the
allocation process is the Upper Left-hand (Northwest) corner
of the transportation table. Therefore, allocate to the Northwest
corner as many units as possible. Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

Northwest corner rule

1. Begin with the upper left hand cell (Left, upper most in
the table), & allocate as many units as possible to that
cell. This will be the smaller amount of either the row
supply or the column demand. Adjust the row & column
quantities to reflect the allocation.
2. Subtract from the row supply & from the column
demand the amount allocated
3. If the column demand is now zero, move to the cell next
to the right, if the row supply is zero, move down to the
cell in the next row. If both are zero, move first to the
next cell on the right then down one cell.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

4. Once a cell is identified as per step (3), it becomes a

northwest cell. Allocate to it an amount as per step (1)
5. Repeat, the above steps (1) - (4) until all the
remaining supply and demand is gone.
The total cost is found by multiplying the quantities
in completed cells by the cell unit cost and, then,
summing those amount.
Its chief advantages are that it is simple to use and
easy to understand. Its chief drawback is that it does
not take transportation costs in to account.

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
The north-west corner method (NWCM)
from RSI RSII RSIII SS
to 12 20 15
50
WHA 25 25

9 11 4
15
WHB 15

20 14 8
55
WHC 10 45

DD 25 50 45

Z = $12xAI + 20xAI + 15xAI + 9xBII + 11xBII + 4xBII + 20xCIII + 14xCIII + 8xCIII

= 12(25) + 20(25) + 15(0) + 9(0) + 11(15) + 4(0) + 20(0) + 14(10) + 8(45)
= $1,465
Haile Y (PhD)
 The Northwest Corner Method

The north-west corner method (NWCM)

The Initial NW Corner

Solution

-
- Transportation cost is computed by evaluating the objective function:
Z = $6x1A + 8x1B + 10x1C + 7x2A + 11x2B + 11x2C + 4x3A + 5x3B + 12x3C
= 6(150) + 8(0) + 10(0) + 7(50) + 11(100) + 11(25) + 4(0) + 5(0) + 12(275)
= $5,925
21
3.1 TRANSPORTATION PROBLEM

Minimum cost /intuitive/LARGEST- PROFIT

METHOD
 LCM is the method used a minimum cost in the
allocation.
It begins a solution by sequentially assigning to the
ratios or cells with the minimum cost as many units as
possible. The first allocation be made to the cell with the
lowest cost
The Least- Cost Method yields not only an initial
feasible solution but also one that is close to optimal in
small problems.

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Steps
1. Identify the cell that has the lowest unit cost, if there is
a tie, select one arbitrarily. Allocate a quantity to this
cell equal to the lower of the available supply for the
row and the demand for the column.
2. Cross out the cells in the row or column that has been
exhausted and adjust the remaining row or column total
accordingly.
3. Identify the cell with the lowest cost from the remaining
cells and allocate a quantity to this cell that is equal to
the lower of the available supply of the row and
demand for the column.
4. Repeat steps 1-3 until all supply and demand have been
exhausted. Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Minimum cost /intuitive/LARGEST- PROFIT METHOD
from RSI RSII RSIII SS
to 12 20 15
50
WHA 25 25
9 11 4
15
WHB 15
20 14 8
55
WHC 25 30

DD 25 50 45

Z = $12xAI + 20xAI + 15xAI + 9xBII + 11xBII + 4xBII + 20xCIII + 14xCIII + 8xCIII

= 12(25) + 20(25) + 15(0) + 9(0) + 11(0) + 4(15) + 20(0) + 14(25) + 8(30)
= $1,450
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Minimum cost /intuitive/LARGEST- PROFIT METHOD

The Initial Minimum Cell Cost Allocation

The Second Minimum Cell Cost Allocation

25
 The Minimum Cell Cost Method
(2 of 3)
 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.

The Initial Solution

- Transportation cost is computed by evaluating the objective function:
Z = $6x1A + 8x1B + 10x1C + 7x2A + 11x2B + 11x2C + 4x3A + 5x3B + 12x3C
= 6(0) + 8(25) + 10(125) + 7(0) + 11(0) + 11(175) + 4(200) + 5(75) + 12(0)
26
= $4,550
3.1 TRANSPORTATION PROBLEM
iii. VOGEL'S APPROXIMATION METHOD (VAM)/PENALTY
METHOD
 VAM is preferred to the other two methods described above. In
this method each allocation is made on the basis of the opportunity
(penalty ) cost that would have incurred if allocation in certain
cells with minimum unit transportation cost were missed.
 In this method allocation are made so that the penalty cost is
minimized. The advantage of this method is that it gives an initial
solution which is nearer to an optimal solution or is the optimal
solution itself.
 VAM determines the penalty for not using the minimum cost
routes, where the objective is to avoid large penalties so that the
penalty from not using the routes is minimized.

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Steps in VAM:
1. Calculate penalties for each row (column) by taking the
smallest & the next smallest unit transportation cost in
the same row (column).
 This difference indicates the penalty or extra cost
which has to be paid if one fails to allocate to the cell
with the minimum unit transportation cost
2. Select the row or column with the largest penalty &
allocate as much unit as possible in the cell having the
least cost in the selected row or column satisfying the
conditions.
 If there is a tie in the values of penalties, then it can be
broken by selecting the cell where maximum Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

3. Adjust the supply & demand & cross out the satisfied
row or column. If a row or column is satisfied
simultaneously, only one of them is crossed out & the
remaining row (column) is assigned a zero supply
(demand) .
• Any row or column with zero supply or demand
should not be used in computing future penalties.
4. Repeat step 1 to 3 until the entire available supply at
various sources & demand at various destinations are
satisfied.

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

Vogel’s Approximation Method (VAM)

The VAM Penalty Costs

30
3.1 TRANSPORTATION PROBLEM
- VAM allocates as much as possible to the minimum cost cell in the row or column with
the largest penalty cost.

The Initial VAM

Allocation

31
 3.1 TRANSPORTATION PROBLEM
- After each VAM cell allocation, all row and column penalty costs are recomputed.

The Second
AM Allocation

32
3.1 TRANSPORTATION PROBLEM
- Recomputed penalty costs after the third allocation.

The Third VAM

Allocation

33
3.1 TRANSPORTATION PROBLEM
VAM and minimum cell cost methods both provide better initial solutions than does the
northwest corner method.

The Initial VAM

Solution

- Transportation cost is computed by evaluating the objective function:

Z = $6x1A + 8x1B + 10x1C + 7x2A + 11x2B + 11x2C + 4x3A + 5x3B + 12x3C
= 6(0) + 8(0) + 10(150) + 7(175) + 11(0) + 11(0) + 4(25) + 5(100) + 12(150)
34
= $$5,125
3.1 TRANSPORTATION PROBLEM
VOGEL'S APPROXIMATION METHOD (VAM)/PENALTY METHOD

from RSI RSII RSIII SS

to 12 20 15
50
WHA 25 25

9 11 4
15
WHB 15

20 14 8
55
WHC 25 30

DD 25 50 45
Z = $12xAI + 20xAI + 15xAI + 9xBII + 11xBII + 4xBII + 20xCIII + 14xCIII + 8xCIII
= 12(25) + 20(25) + 15(0) + 9(0) + 11(0) + 4(15) + 20(0) + 14(25) + 8(30)
= $1,450 Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Finding the optimal solution
An optimal solution is one in which there is no
opportunity cost. That is, there is no other set of
transportation routes (allocations) that will reduce the total
transportation cost.
Thus we have to evaluate each unoccupied cell (represents
unused route) in the transportation table in terms of
opportunity cost.
The purpose of the optimality test is to see if the proposed
solution just generated can be improved or not.
The solution to be checked for optimality must be non-
degenerate i.e the no of occupied cells must be equal
m+n-1. Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

The Procedure for testing optimality is analogous to that

of the simplex method. A distinction is made between
basic variables, those associated with occupied cells &
non-basic variables, those associated with the empty cells
For each empty cell, the effect of changing it to an
occupied cell is examined. If any of these changes are
favorable, the solution is not optimal & a new solution
must be designed.
 A favorable change means an increase in the value of the
objective function in maximization problems or a decrease
in minimization problems.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

Methods of testing for optimality

 The stepping-stone methods
 The MODI method
A. Stepping-stone method
The stepping-stone method: it 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 in to an
empty cell.
It helps to answer “what if questions”. What impact on total
cost would there be if one unit were shifted in to a cell.
If the shift would result in a cost savings, the stepping stone
path can be used to determine the maximum number of units
that can be shifted in to the empty cell.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Rules for drawing each closed loop:
1. Select an unused square (cell) to be evaluates.
2. Beginning at this cell, trace a closed loop going clockwise draw
an arrow to an occupied cell in the same row ( or column).
3. Move vertically or horizontally (but never diagonally) to
another occupied cell “stepping –over” unoccupied or occupied
cells (if necessary) without changing them. Follow the same
procedure to other occupied cells until returning to the original
empty cell.
4. Begin with a plus (+) sign at the unused cell, place alternative
(-) signs and plus signs on each corner square of the closed path
just traced.
5. There must be exactly one cell with a + sign and exactly one
cell with a - sign in any row or column in which the loop turns.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

6. An even no of at least four cells must

participate in a loop and the occupied cells can
be visited once and only once.
7. Repeat steps 1 to 4 until an improvement index
has been calculated for all unused squares
(cells). If all indices computed are greater than
or equal to zero, an optimal solution has been
reached. If not, it is possible to improve the
current solution and decrease total shipping
costs.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
 Note: + Sign mean one unit would be added to the cell
and the minus sign indicates one unit would be
subtracted from the cell. The net impact of such a one
unit shift can be determined by adding the cell costs
with sign attached and nothing the resulting value.
 If one or more of the cell evaluators is negative, the
existing solution is not optimal .i.e: For minimization
(cost) problems, all the cell evaluators must be
positive for optimality.
 Check all the empty cells and select for improvement
the one with the largest improvement potential.

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Stepping-stone method
- The stepping-stone method determines if there is a cell with no allocation that would
reduce cost if used.

+1

The Allocation of One Ton to Cell 1A 42

3.1 TRANSPORTATION PROBLEM
- Must subtract one ton from another allocation along that row.

The Subtraction of
One Ton from
Cell 1B

43
3.1 TRANSPORTATION PROBLEM
- A requirement of this solution method is that units can only be added to and subtracted
from cells that already have allocations, thus one ton must be added to a cell as shown.

The Addition of One

Ton to Cell 3B and the
Subtraction of One
Ton from Cell 3A

44
3.1 TRANSPORTATION PROBLEM
- An empty cell that will reduce cost is a potential entering variable.
- To evaluate the cost reduction potential of an empty cell, a closed path connecting used
cells to the empty cells is identified.

The Stepping-
Stone Path for
Cell 2A

45
3.1 TRANSPORTATION PROBLEM
- The remaining stepping-stone paths and resulting computations for cells 2B and 3C.

The Stepping-Stone Path

for Cell 2B

The Stepping-
Stone Path for
Cell 3C

46
3.1 TRANSPORTATION PROBLEM
Developing an improved solution.
 Improving the solution involves reallocating quantities in the
transportation table;
 this requires focusing on the unoccupied cell that has the largest
negative cell evaluation.
 The stepping stone path for that unoccupied cell is necessary for
determining how many units can be reallocating while retaining the
balance of the supply and demand for that table.
 The positive in the path indicates unit to be added and negative
sign indicates units to be subtracted.
 The limit on subtraction is the smallest quantity in a negative
position along the cell path.
 This quantity should be subtracted from quantity in each cell
with a negative sign and add to the quantity in each cell with a
positive sign.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
- After all empty cells are evaluated, the one with the greatest cost reduction potential is the
entering variable.
- A tie can be broken arbitrarily.

The Stepping-Stone
Path for Cell 1A

48
3.1 TRANSPORTATION PROBLEM
- When reallocating units to the entering variable (cell), the amount is the minimum amount
subtracted on the stepping-stone path.
- At each iteration one variable enters and one leaves (just as in the simplex method).

The Second Iteration of

the Stepping-Stone
Method

49
3.1 TRANSPORTATION PROBLEM
- Check to see if the solution is optimal.

The Stepping-Stone Path for

Cell 2A

The Stepping-
Stone Path for Cell
1B

50
3.1 TRANSPORTATION PROBLEM
- Continuing check for optimality.

The Stepping-Stone
Path for Cell 2B

The Stepping-Stone
Path for Cell 3C

51
3.1 TRANSPORTATION PROBLEM
The stepping-stone process is repeated until none of the
empty cells will reduce costs (i.e., an optimal solution).
 In example, evaluation of four paths indicates no cost
reductions, therefore Table 19 solution is optimal.
- Solution and total minimum cost :
x1A = 25 tons, x2C = 175 tons, x3A = 175 tons, x1C = 125 tons, x3B = 100 tons
Z = $6(25) + 8(0) + 10(125) + 7(0) + 11(0) + 11(175) + 4(175) + 5(100) +
12(0)
= $4,525

52
3.1 TRANSPORTATION PROBLEM
 A multiple optimal solution occurs when an empty cell has a cost change of zero and
all other empty cells are positive
 An alternate optimal solution is determined by allocating to the empty cell with a zero
cost change.
 Alternate optimal total minimum cost also equals $4,525.

The Alternative
Optimal Solution

53
3.1 TRANSPORTATION PROBLEM
Initial Feasible Solution Using NWCM
To SR I SR II SR III supply
From
12 20 15
W.H.A 25 25 50
9 11 4
W.H.B 15 15
20 14 8
W.H.C 10 45 55
120
Demand 25 50 45 120
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
B. MODI method (modified distribution)
 It involves the use of index numbers that are established for the row
and columns. There is one index number for each column and one
for each row. For any occupied cell, the sum of the row index and
the column index equals the cell’s unit transportation cost. The 1st
row always assigning a value of zero for occupied cells.
 The MODI method allows us to compute improvement indices
quickly for each unused cell with out drawing all of the closed
paths. Because of this, it can often provide considerable time
savings over the stepping-stone method for solving transportation
problems.
Steps in the MODI Method
1. For an initial basic feasible solution, calculate Ui and Vj ;for rows
and columns and set
Cij = Ui + Vj for all occupied calls (i , j)
Haile Y (PhD)
i.e: Cell cost= Raw Index +Column Index
3.1 TRANSPORTATION PROBLEM
2. For unoccupied cells, calculate opportunity cost by using the relation:

CijE = Cij– (Ui + Vj); for all j and j.

cell evaluation = cell cost – row index – column index
Where Cij Eis the cell evaluator or opportunity cost
3. Examine the sign of each Cij E
 If CijE > 0, then current basic feasible solution is optimal.
 If CijE = 0, then the current basic feasible solution will remain be unaffected but
an alternative solution exists.
 If one or more CijE < 0, then an improved solution be obtained entering
unoccupied cell (i, j), in the basis. An unoccupied cell having the largest negative
value of CijE is chosen for entering into the solution mix (new transportation
schedule)
4. Solve the problem as you did using the stepping-stone method.
5. Obtain a new improved solution by allocating units to the unoccupied call and
calculate the new transportation cost. Haile Y (PhD)
6. Test the revised solution for optimality.
3.1 TRANSPORTATION PROBLEM

The Modified Distribution Method (MODI)

- 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.

The Minimum Cell Cost

Initial Solution

57
3.1 TRANSPORTATION PROBLEM
- 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

The Initial Solution with All ui and vj Values

- Five equations with 6 unknowns, therefore let u 1 = 0 and solve to obtain:

vB = 8, vC = 10, u2 = 1, u3 = -3, vA= 7
58
3.1 TRANSPORTATION PROBLEM
 Each MODI allocation replicates the stepping-stone
allocation.
 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 Table 26:
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 59
3.1 TRANSPORTATION PROBLEM

- After each allocation to an empty cell, the ui and vj values must be recomputed.

The Second Iteration of the MODI Solution Method

60
The Modified Distribution Method (MODI)
(5 of 6)
- Recomputing ui and vj values:
x1A: u1 + vA = 6, vA = 6 x1C: u1 + vC = 10, vC = 10 x2C: u2 + vC = 11, u2 = 1
x3A: u3 + vA = 4, u3 = -2 x3B: u3 + vB = 5, vB = 7

The New ui and vj Values for the Second Iteration

61
3.1 TRANSPORTATION PROBLEM

- Cost changes for the empty cells, cij - ui - vj = kij;

x1B: k1B = c1B - u1 - vB = 8 - 0 - 7 = +1
x2A: k2A = c2A - u2 - vA = 7 - 1 - 6 = 0
x2B: k2B = c2B - u2 - vB = 11 - 1 -7 = +3
x3C: k2B = c2B - u3 - vC = 12 - (-2) - 10 = +4
 Since none of the values are negative, solution
obtained is optimal.
 Cell 2A with a zero cost change indicates a multiple
optimal solution.
62
3.1 TRANSPORTATION PROBLEM
Initial Feasible Solution Using NWCM
To RS I RS II RS III supply
From
12 20 15
W.H.A 25 25 50
9 11 4
W.H.B 15 15
20 14 8
W.H.C 10 45 55
120
Demand 25 50 45 120
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Exercise:
1. A firm owns facilities at six places. It has manufacturing plants at
places A, B and C with daily production of 50, 40, and 60 units
respectively. At point D, E and F it has three warehouses with daily
demand of 20, 95, and 35 units respectively. Per unit shipping costs
are given in the following table. If the firm wants to minimize its total
transportation cost, haw should it route its products?
Warehouse

Plant D E F
A 4 1
B 3 8 7
C 4 4 2 Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
2. 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 following.
Farm Weekly capacity
(cubic yard)
A 100
B 200
C 200
Demand for the topsoil generated by the construction project is
Stores Weekly demand
(cubic yard)
I 50
II 150
Haile Y (PhD)
III 300
3.1 TRANSPORTATION PROBLEM
 The manager of the sand and gravel pit has estimated the cost per
cubic yard to ship over each of the possible route.

Plant Project I Project II Project III

Farm A 4 2 8
Farm B 5 1 9
Required:
farm C 7 6 3
 Develop a transportation model and find the initial feasible
solution using NWCM
 Evaluate it using MODI and stepping stone and solve for
optimality.
 Find an initial solution using intuitive approach and VAM. Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Special issue: there are a number of special issue
1. Unequal demand and supply
 When supply and demand are not equal, it is necessary to modify the
original problems so that supply and demand is equal.
 This is accomplished by adding either a dummy column or a dummy row;
a dummy row is added if the supply is less than demand and a dummy
column is added if demand is less than supply. The dummy is assigned unit
cost of zero for each cell, and it is given a supply or a demand 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.
 If the intuitive approach is used to obtain the feasible solution when a
dummy is involved, make assignments to the dummy last. Hence, begin by
assigning units to the cell with the lowest nonzero cost the next lowest
nonzero cost, and so on. Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Example: given the following transportation problem:
Markets
warehouses A B C Supply

1 10 12 7 180
2 14 11 6 100
3 9 5 13 160
4 To A 11 B 7 C 9 120
Supply
From demand 240 200 220
10 12 7
W.H.1 180
14 11 6
W.H.2 100
9 5 13
160
W.H.3
W.H.4 11 7 9 120
Dummy 0 0 0 100
660
Demand 240 200 220 660 Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
 2. Maximization
 Some transportation type problems concern profit or revenues rather
than cost. In such case the objective will be to maximize the profit rather
than to minimize.
 Such problem 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.
 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 to compute the total profit for the plan.
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Example 1: solve the following transportation problem for maximization problem
Market
warehouses A B C D Supply

X 12 18 6 25 200
Y 8 7 10 18 500
Z To 14 A 3 B 11 C 20 D 300 supply
From
demand 180 320 100 400
13 7 19 0
W.H.X 200
17 18 15 7
W.H.Y 500

11 22 14 5
W.H.Z 300
1000
Demand 180 320 100 400 1000
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Example 2: a company has four factories at places A, B, C, and D
with monthly capacity of 10, 15, 20 and 15 units respectively in
different location in the country and four sales agencies at point I,II,
III, and IV with monthly requirements of 8, 12, 18, and 22
respectively located in for other locations in the country. The profits
per unit when produced and sold in various combinations of the
factories and sales agencies are given bellow. Formulate as a
transportation model and find the optimal solution.
Agencies
Factories I II III VI

A 3 7 9 4
B 2 2 6 1
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

Unacceptable routes:
 in some case, an origin- destination combination
may be unacceptable, this may be due to weather
factors, equipment breakdown, labor problems, or
skill requirements’ that either prohibit or make
undesirable, certain combination (routes).
 One rule of thumb would be to assign a cost that is
10 times the largest cost in the table.
 The prohibited route may appear in a non-optimal
solution, but it will be eliminated by the time the
optimal solution is reached.

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Example given the following transportation problem:
Market

Plant M1 M2 M3 Supply

P1 10 12 7 180
P2 14 11 6 100
P3 9 5 13 160
P4 11 7 9 120
 It is known that currently nothing can be sent from plant
demand 240and from200
P1 to market M1 120
plant P3 to market M3. solve
the problem and determine the least cost transportation
schedule. Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
To M1 M2 M3 Supply
From
140 12 7
P1 180
14 11 6
P2 100
9 5 140
160
P3
P4 11 7 9 120
560
Demand 240 200 120 560

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
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. So that will not be able to evaluate
all empty cells using stepping stone method and MODI method. In case of
stepping stone method, this means that there will be at least one empty cell for
which an evaluation path cannot be constructed and incase of MODI method, it
will be impossible to determine all of the row and column index number.
To project I project II Project III Supply
From
4 2 8
Farm A 100 100
5 1 9
Farm B 50 150 200
7 6 3
200 200
Farm C
500
Demand 50 150 300 500
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Example 2: determine optimal solution to the problem given below.
Obtain the initial solution by VAM
Market

Plant M1 M2 M3 M4 Supply

P1 6 4 9 1 40
P2 20 6 11 3 40
P3 7 1 0 14 50
P4 7 1 12 6 90
demand 90 30 50 30
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Alternate solution:
 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 the alternate solution by reallocating the maximum
number of units possible around the stepping-stone method.
To project I project II Project supply
From III
4 2 8
Farm A 50 50 100
5 1 9
Farm B 150 50 200
7 6 3
200 200
Farm C
500
Demand 50 150 300 500
Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM

To project project Project supply

From I II III
4 2 8
Farm A 100 100
5 1 9
Farm B 50 150 200
7 6 3
200 200

Farm C
500
Demand 50 150 300 500

Haile Y (PhD)
3.1 TRANSPORTATION PROBLEM
Example1: given the following transportation problem,
solve the problem and determine the least cost
transportation schedule, is the optimal solution obtained by
you unique? If not, what is/are the other optimal
solution/s?
Market
warehouses E F G H Supply

A 3 3 3 6 200
B 4 5 3 5 400
C 4 4 4 6 300
D 5 2 3 7 200
demand 350 450 200 100 Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
 The Assignment Problem(AP) that involves determining
the most efficient assignment of people to projects,
salespeople to territories, contracts to bidders, jobs to
machines, and so on.
 The objective is to assign a number of resources to an
equal number of activities so as to minimize total costs or
total time or maximize total profit of allocation.
 The problem of assignment arises because available
resources such as men, machines, etc have varying degrees
of efficiency for performing different activities such as job.
Therefore, cost, profit or time of performing the different
activities is different.
Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
 Assumptions:
 Number of jobs is equal to the number of machines or
persons
 Each man or machine is loaded with one and only one job.
 Each man or machine is independently capable of
handling any of the job being presented.
 Loading criteria must be clearly specified such as
“minimizing operating time” or “maximizing profit” ,or
“minimizing production cost” or “minimizing throughout
(production cycle) time ” etc.

Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
Methods of solving assignment problems
Hungarian Method/Food’s Technique/
The Hungarian Method (developed by Hungarian
mathematician D.Konig) of assignment provides us
with efficient method of finding the optimal solution
without having to make a direct comparison of every
solution. It works on the principle of reducing the
given cost matrix (the principle of matrix reduction)
to a matrix of opportunity costs
Opportunity costs show the relative penalties
associated with assigning resource to an activity as
opposed to making the best or least-cost assignment.
Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
Steps:
1. Locate the smallest cost element in each row of the cost table and
subtract this smallest from each element in that row. As a result
there shall be at least one zero in each row of this table, called the
reduced cost table (row reduction).
2. In the reduced cost table obtained, consider each column and
locate the smallest element in it and subtract the smallest value
from every other entry in the column. As a result, there would be
at least one zero in each of the rows and columns of the second
reduced cost table (column reduction).
3. Draw the minimum number of horizontal and vertical lines (not
diagonal ones) that are required to cover the entire zero elements.
If the number of lines drawn equal to number of row/columns the
solution is optimal and proceeds to step 6. If not go to step 4.
Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
4. Select the smallest uncovered (by the line) cost element and
subtract this element from all uncovered elements including itself
and add this element to each value located at the intersection of any
lines.
5. Repeat step 3 and 4 until an optimal solution is obtained
6. Given the optimal solution, make the job assignments as indicated
by the zero elements. This is done as follows:
 Locate a row which only zeros elements. Assign the job
corresponding to this element to its corresponding person/machine.
Cross out the zero’s, if any, in the column corresponding to the
element, which is indicative of the fact that the particular job and
person are no more available. Repeat until all assignments are made
and determine the total cost with reference to the original cost table.

Haile Y (PhD)
 The Assignment Model
Problem: Assign four teams of officials to four games in a way
that will minimize total distance traveled by the officials. Supply
is always one team of officials, demand is for only one team of
officials at each game.

85
 The Assignment Model

Minimize Z = 210xAR + 90xAA + 180xAD + 160xAC + 100xBR + 70xBA + 130xBD + 200xBC

+ 175xCR + 105xCA + 140xCD + 170xCC + 80xDR + 65xDA + 105xDD +120xDC
subject to
xAR + xAA + xAD+ xAC = 1
xBR + xBA + xBD + xBC = 1
xCR + xCA+ xCD + xCC = 1
xDR + xDA + xDD + xDC = 1
xAR + xBR + xCR + xDR = 1
xAA + xBA + xCA + xDA = 1
xAD+ xBD + xCD + xDD = 1
xAC + xBC + xCC + xDC = 1
xij  0

86
 The Assignment Model
 An assignment problem is a special form of the transportation problem where all
supply and demand values equal one.
 Example: assigning four teams of officials to four games in a way that will
minimize distance traveled by the officials.

The Travel Distances to Each Game for Each Team of Officials

87
 The Assignment Model

 An opportunity cost table is developed by first subtracting the minimum value in each
row from all other row values (row reductions) and then repeating this process for each
column.

The Assignment Tableau with Row Reductions

88
 The Assignment Model
 The minimum value in each column is subtracted from all column values (column reductions).
 Assignments can be made in the table wherever a zero is present.
 An optimal solution results when each of the four teams can be assigned to a different
game.
 Table does not contain an optimal solution

The Tableau with Column Reductions

89
 The Assignment Model
 An optimal solution occurs when the number of independent unique assignments equals the
number of rows and columns.
 If the number of unique assignments is less than the number of rows (or columns) a line test
must be used.

The Opportunity Cost Table with the Line Test

90
 The Assignment Model
 In a line test all zeros are crossed out by horizontal and vertical lines;
the minimum uncrossed value is subtracted from all other uncrossed
values and added to values where two lines cross.

The Second Iteration

91
 The Assignment Model
- At least four lines are required to cross out all zeros in table 38.
- This indicates an optimal solution has been reached.
- Assignments and distances:
Assignment Distance Assignment Distance
Team A  Atlanta 90 Team A  Clemson 160
Team B  Raleigh 100 Team B  Atlanta 70
Team C  Durham 140 Team C  Durham 140
Team D  Clemson 120 Team D  Raleigh 80
Total 450 miles Total 450 miles

- If in initial assignment team A went to Clemson, result is the same; resulting

assignments represent multiple optimal solutions.

92
2.2. ASSIGNMENT PROBLEMS

Example; if first printing has three available typewriters

(A, B, C) and three new job to be completed, its table
might appear as follows. The dollar entries represents
the firm’s estimate of what it will cost for each job to be
completed by each typewriters.

Typesetter
Job A B C
R-34 $11 $14 $ 6
S-66 $ 8 $10 $11
T-50 $ 9 $12 $ 7 Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS

Typesetter
A B C
Job
R-34 $11 $14 $ 6
S-66 $ 8 $10 $11
T-50 $ 9 $12 $ 7

Step 1a - Rows Step 1b - Columns

Typesetter Typesetter
A B C A B C
Job Job
R-34 $ 5 $ 8 $ 0 R-34 $ 5 $ 6 $ 0
S-66 $ 0 $ 2 $ 3 S-66 $ 0 $ 0 $ 3
T-50 $ 2 $ 5 $ 0 T-50 $ 2 $ 3 $ 0
Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS

The smallest uncovered number is 2 so

Step 2 - Lines this is subtracted from all other
uncovered numbers and added to
Typesetter numbers at the intersection of lines
A B C
Job
R-34 $ 5 $ 6 $ 0
S-66 $ 0 $ 0 $ 3
T-50 $ 2 $ 3 $ 0 Step 3 - Subtraction

Typesetter
Because only two lines are needed to A B C
cover all the zeros, the solution is not Job
optimal
R-34 $ 3 $ 4 $ 0
S-66 $ 0 $ 0 $ 5
T-50 $ 0 $ 1 $ 0
Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS

Step 2 - Lines Start by assigning R-34 to worker C as this

is the only possible assignment for worker
C.
Typesetter
A B C Job T-50 must go
Job to worker A as worker C is
R-34 $ 3 $ 4 $ 0 already assigned. This
S-66 $ 0 $ 0 $ 5 leaves S-66 for worker B.
T-50 $ 0 $ 1 $ 0 Step 4 - Assignments

Typesetter
Because three lines are needed, the
solution is optimal and assignments A B C
can be made Job
R-34 $ 3 $ 4 $ 0
S-66 $ 0 $ 0 $ 5
T-50 $ 0 $ 1 $ 0
Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS

Step 4 - Assignments

Typesetter Typesetter
A B C A B C
Job Job
R-34 $11 $14 $ 6 R-34 $ 3 $ 4 $ 0
S-66 $ 8 $10 $11 S-66 $ 0 $ 0 $ 5
T-50 $ 9 $12 $ 7 T-50 $ 0 $ 1 $ 0

From the original cost table

Minimum cost = $6 + $10 + $9 = $25

Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
Example 2. The manager wants to assign four jobs
to four employees such that the total cost to
perform the job is the least. Based on previous
experience he has the information on the costs of
performing each of the four jobs by each of the
four employees, as given bellow. What will be the
minimum cost
Employees
jobs A B C D

1 15 20 18 24
2 12 17 16 15
3 14 15 19 17 Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
3. A production supervisor is considering how he should assign the
four jobs that are to be performed to four of workers working
under him. He wants to assign the jobs to the workers such that the
aggregate time to perform the jobs is the least. Based on previous
experiences, he has the information on the time taken by the four
workers in performing these jobs, as given bellow.
Time taken by the workers on various jobs (in minutes)
Workers
Jobs A B C D

1 45 40 51 67
2 57 42 63 55
3 49 52 48 64
Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
Special issues
1. Unbalanced assignment:
the Hungarian method of solving an assignment problem requires that the number
of columns should be equal to the number of rows. When they are equal, the
problem is a balanced problem, and when not, it is called an unbalanced problem.
In case the machines are in excess, the excess machines would remain idle and so is
the case when men are in excess the number of excess, people would not get an
assignment. In such situations, dummy columns/rows, whichever is smaller in
number, are inserted with zeros as the cost elements. Now the problem is solved in
the usual manner.
 Example: a company has 4 machines to do 3 jobs. Each job can be assigned to
one and only one machine. The cost of each job on each machine is given
bellow determine the job assignment.
Machine

job W X Y Z

Haile Y (PhD)
A 18 24 28 32
2.2. ASSIGNMENT PROBLEMS
2. Constrained/prohibited/assignment problems:
it happens same times that a worker cannot perform a certain job or is not
to be assigned a particular job. To cope with this situation, the cost of
performing that job by such person is taken to be extremely large (M). Then
the solution to the assignment problem proceeds in the manner discussed
earlier. The effect of assigning prohibitive cost to such person-job
combinations is that they do not figure in the final solution.
 Example: you are given the information about the cost of performing
different jobs by different persons. The job-person making M indicate
that the individual involved cannot perform the particular job. Using this
information state I) the optimal assignment of jobs II) the cost of such
assignment
Jobs
person J1 J2 J3 J4 J5

P1 27 18 M 20 21 Haile Y (PhD)

P2 31 24 21 12 17
2.2. ASSIGNMENT PROBLEMS
3. Unique versus multiple solution:
In the process of making assignment, a situation may arise wherein the
various rows and columns with multiple zeros. In such cases, we get
multiple optimal solutions to the given problems. When a problem has a
unique optimal solution, it means that no other solution to the problem
exists which yields the same objective function value (cost, time, profit,
etc.) as the one obtained from the optimal solution derived. In a problem
with multiple optimal solutions, there exist more than one solution which
all are optimal and equally alternative.
 Example: solve the following assignment problem and obtain the
minimum cost at which all the jobs can be performed.
Job (cost in birr)
Worker J1 J2 J3 J4 J5

P1 28 18 32 20 21 Haile Y (PhD)
2.2. ASSIGNMENT PROBLEMS
4. Maximization case,
in same situations, the assignment problem may call for maximization at profit,
revenue etc. as the objective. For dealing with a maximization problem, first change
it in to an equivalent minimization problem. This is achieved by subtracting each of
the elements of the given pay-off matrix from the largest of all values in the given
matrix. Then the problem is solved the same way as a minimization problem it.
 Example; a company plans to assign 5 salesmen to 5 districts in which it
operates. Estimates of sales revenue in thousands of birr for each salesman in
different district are given below. In your opinion, what should be the placement
of the salesmen if the objective is to maximize the expected sales revenue?
Expected sales data
District
Salesmen D1 D2 D3 D4 D5

S1 40 46 48 36 48
S2 48 32 36 29 44
S3 49 35 41 38 45
Haile Y (PhD)
S4 30 46 49 44 44
2.2. ASSIGNMENT PROBLEMS
Salesmen D1 D2 D3 D4 D5

S1 40 46 48 36 48
S2 48 32 36 29 44
S3 49 35 41 38 45
S4 30 46 49 44 44
S5 37 41 48 43 47
Salesmen D1 D2 D3 D4 D5

S1 9 3 1 13 1
S2 1 17 13 20 5
S3 0 14 8 11 4
S4 19 3 0 5 5
S5 12 8 1 6 2
Haile Y (PhD)
 U! ! !
YO
A NK
TH

Haile Y (PhD)