The Way Forward!

Unit Three: Transportation

Model

Yalew Mamo
Introduction
• Industries require to transport their products available at
several sources or production centers to a number of
destinations or markets.
• Minimizing the transportation cost will benefit the
organization by increasing the profit. To analyze and
minimize the cost of transportation, transportation model
is used.
• The name “transportation model” is, however, misleading.
This model can be used for a wide variety of situations
such as scheduling, personnel assignment, product mix
problems and many others, so that the model is really not
confined to transportation or distribution only.
Continued
• The development of transportation models involve a
number of production centers / sources and a number of
destinations / markets. Each shipping source has a
certain capacity and each destination has a certain
requirement associated with a certain cost of
transportation from the sources to the destinations.
• The objective is to minimize the cost of transportation
while meeting the requirements at the destinations.
• Transportation problems may also involve movement of a
product from plants to warehouses, warehouses to
wholesalers, wholesalers to retailers, retailers to
customers, etc.
Assumptions in the Transportation Model
1. Total quantity of the items available at different sources/
supply is equal to the total requirement/ demand at
different destinations / markets.
2. Items can be transported conveniently from all sources
to destinations.
3. The unit transportation cost of the item from all sources
to destinations is known.
4. The transportation cost on a given route is directly
proportional to the number of units shipped on that
route.
5. The objective is to minimize the total transportation cost
for the organization as a whole and not for individual
supply and distribution centers.
Definition of the Transportation Model
• Suppose that there are m sources and n destinations. Let
ai be the number of supply units available at source i(i =
1,2,3,….., m) and let bj be the number of demand units
required at destination j(j = 1,2,3,….., n). Let cij represent
the unit transportation cost for transporting the units from
source i to destination j.
• The objective is to determine the number of units to be
transported from source i to destination j so that the total
transportation cost is minimum. In addition, the supply
limits at the sources and the demand requirements at the
destinations must be satisfied exactly.
• If xij (xij ≥ 0) is the number of units shipped from source i
to destination j.
Continued
Continued
•  A few terms used in connection with transportation
models are defined below.
• Feasible solution: A feasible solution to a transportation
problem is a set of non-negative allocations, x  thatij

satisfies the rim (row and column) restrictions.

• Basic feasible solution: A feasible solution to a
transportation problem is said to be a basic feasible
solution if it contains no more than m + n – 1 non –
negative allocations, where m is the number of rows and n
is the number of columns of the transportation problem.
• Optimal solution: A feasible solution (not necessarily
basic) that minimizes (maximizes) the transportation cost
(profit) is called an optimal solution.
Continued
• Non -degenerate basic feasible solution: A basic
feasible solution to a (m x n) transportation problem is
said to be non – degenerate if,
•  the total number of non-negative allocations is
exactly m + n – 1 (i.e., number of independent
constraint equations), and
• these m + n – 1 allocations are in independent
positions.
• Degenerate basic feasible solution: A basic feasible
solution in which the total number of non-negative
allocations is less than m + n – 1 is called degenerate
basic feasible solution.
Matrix Terminology
• The matrix used in the transportation models consists of
squares called ‘cells’, which when stacked form ‘columns’
vertically and ‘rows’ horizontally.
•  The cell located at the intersection of a row and column is
designated by its row and column headings. Thus the cell
located at the intersection of row A and column 3 is called
cell (A, 3). Unit costs are placed in each cell.
Formulation and Solution of Transportation Models
• Example (Transportation Problem)
• A dairy firm has three plants located in a region. Dairy milk
production at each plant is as follows:
Plant 1: … 6 million liters
Plant 2: … 1 million liters
Plant 3: … 10 million liters
Each day the firm must fulfill the needs of its four distribution
centers. Milk requirement at each center as follows:
Distribution center 1 … 7 million liters
Distribution center 2 … 5 million liters
Distribution center 3 … 3 million liters and
Distribution center 4 … 2 million liters
Continued
• Cost of transporting one million liters of milk from each
plant to each distribution center is given in the following
table in hundreds of birrs.
Continued
• Show that the problem represents a network situation.
• Formulate the mathematical model for the problem
• The dairy firm wishes to determine as to how much should
be the transportation from which milk plant to which
distribution center so that the total cost of transportation is
the minimum. Determine the optimal transportation policy.
Solution
• i. Let us represent the example graphically:
ii. Formulation of Model
• Minimization (total cost)
• Z = 2x11+ 3x12+ 11x13+7x14+
1x21+ 0x22+ 6x23+ 1x24+
5x31+ 8x32+ 15x33+ 9x34
• Subject to
• Supply x11+x12+x13+x14=6
x21+x22+x23+x24=1
31+x32+x33+x34=10
• Demand x11+x21+x31=7
x12+x22+x32=5
x13+x23+x33=3
x14+x24+x34=2
Non negativity x11,x12…x34≥0
Continued
In general, such a situation will involve (mxn) variables and
(m+n) constraints. However, due to the transportation model
is always balanced, one of these constraints must be
redundant. Thus the model has m+n – 1 independent
constant equations, which means that the starting basic
feasible solution consists of m+n-1 basic variables.
The following points may be noted in transportation problem
1. All supply and demand constraints are of equal type
2. The are expressed in terms of only one kind of unit
3. Each variables occurs only once in the supply constraints
and only once in the demand constraints
4. Each variable in the constraints has unit coefficient only.
iii. Solution of the Transportation Model
• Step I: Make a Transportation Table
• A check is made to find if total supply and demand are
equal. If yes, the problem is said to be a balanced or self
contained or standard problem.
Step II: Find a basic Feasible Solution
• There are different methods to find basic feasible solution.
The difference among these methods is the quality of the
initial basic feasible solution they produce, in the sense
that a better starting solution will involve a smaller
objective value (minimization problem).
• (1) North West Corner Rule or North west
corner method
• Start in the north-west (upper left) corner of the
requirements table i.e. the transportation matrix framed in
step I and compare the supply of plant 1 (call it S1) with
the requirement of distribution center 1 (call it D1).
Continued Distribution Center

1 2 3 4
Supply
3 11 7
1 2 (6) 6/0

Plant 2 1 (1) 0 6 1 1/0

3 5 8 (5) 15 (3) 9 (2) 10/5/2/0

7/1/0 5/0 3/0 2/0

Requirement
The cells with allocation are called basic or allocated or occupied
or loaded cells. Cells without allocations are called non-basic or
vacant cell.
This method of allocation does not take in to account the
transportation cost and, therefore, may not yield a good (most
economical ) initial solution. The transportation cost associated with
solution is
Z = (2x6) + (1x1) + (8x5) + (15x3) + (9x2) x100 = 11, 600 birr
2. Row Minima Method
• Row Minima Method
• Step-1: In this method, we allocate as much as possible in
the lowest cost cell of the first row, i.e. allocate min(si,dj).
• Step-2:
• a. Subtract this min value from supply si and demand dj.
• b. If the supply si is 0, then cross (strike) that row and If
the demand dj is 0 then cross (strike) that column.
• c. If min unit cost cell is not unique, then select the cell
where maximum allocation can be possible
• Step-3: Repeat this process for all uncrossed rows and
columns until all supply and demand values are 0.
 Continued Distribution Center

1 2 3 4
Supply
3 11 7
1 2 (6) 6/0

Plant 2 1 0 (1) 6 1 1/0

3 5 (1) 8 (4) 15 (3) 9 (2) 10/9/5/2/0

7/1/0 5/4/0 3/0 2/0

Requirement

The transportation cost associated with solution is

Z = (2x6) + (0x1) + (5x1) + (8x4) + (15x3) + (9x2) x100 = 11,
200 birr
3. Column Minima Method
• Step-1: In this method, we allocate as much as possible in
the lowest cost cell of the first Column, i.e. allocate
min(si,dj).
• Step-2:
• a. Subtract this min value from supply si and demand dj.
• b. If the supply si is 0, then cross (strike) that row and If
the demand dj is 0 then cross (strike) that column.
• c. If min unit cost cell is not unique, then select the cell
where maximum allocation can be possible
• Step-3: Repeat this process for all uncrossed rows and
columns until all supply and demand values are 0.
 Continued Distribution Center

1 2 3 4
Supply
3 11 7
1 2 (6) 6/0

Plant 2 1 (1) 0 6 1 1/0

3 5 8 (5) 15 (3) 9 (2) 10/5/3/0

7/6/0 5/0 3/0 2/0

Requirement

The transportation cost associated with solution is

Z = (2x6) + (1x1) + (8x5) + (15x3) + (9x2) x100 = 11, 600 birr
4. Least-Cost Method
• Step-1: Select the cell having minimum unit cost cij and
allocate as much as possible, i.e. min(si,dj).
• Step-2:
• a. Subtract this min value from supply si and demand dj.
• b. If the supply si is 0, then cross (strike) that row and If
the demand dj is 0 then cross (strike) that column.
• c. If min unit cost cell is not unique, then select the cell
where maximum allocation can be possible
• Step-3: Repeat this steps for all uncrossed rows and
columns until all supply and demand values are 0.
 Continued Distribution Center

1 2 3 4
Supply
3 11 7
1 2 (6) 6/0

Plant 2 1 0 (1) 6 1 1/0

3 5 (1) 8 (4) 15 (3) 9 (2) 10/9/5/2/0

7/1/0 5/4/0 3/0 2/0

Requirement

The transportation cost associated with solution is

Z = (2x6) + (0x1) + (5x1) + (8x4) + (15x3) + (9x2) x100 = 11,
200 birr
5. Vogal’s Approximation Method (VAM) or Penalty
Method or Regret Method
• This method is preferred over other methods, because the
initial basic feasible solution obtained by this method is
either optimal solution or very nearer to the optimal
solution.
• Vogel's Approximation Method (VAM) Steps (Rule)
• Step-1: Find the cells having smallest and next to smallest
cost in each row and write the difference (called penalty)
along the side of the table in row penalty.
• Step-2: Find the cells having smallest and next to smallest
cost in each column and write the difference (called
penalty) along the side of the table in each column
penalty.
Continued
• Step-3: Select the row or column with the maximum
penalty and find cell that has least cost in selected row or
column. Allocate as much as possible in this cell.
• If there is a tie in the values of penalties then select the
cell where maximum allocation can be possible
• Step-4: Adjust the supply & demand and cross out (strike
out) the satisfied row or column.
• Step-5: Repeat this steps until all supply and demand
values are 0.
Continued

The transportation cost associated with solution is

Z = (2x1) + (3x5) + (1x1) + (5x6) + (15x3) + (9x1) x100 =
10, 200 birr
Step III: Perform Optimality Test
• Making an optimality test to find whether the obtained
feasible solution is optimal or not. An optimality test can,
of course, be performed only on that feasible solution in
which
• A. number of allocation is m + n – 1, where m is the
number of rows and n is the number of columns. In the
given situation, m =3 and n = 4 and number of allocation
is 6 which is equal to (m + n – 1) (3+4 – 1 = 6) Hence
optimal test can be performed.
• B. these (m + n – 1) allocation should be in independent
positions.
Stepping Stone Method Steps (Rule)
• Step-1: Find an initial basic feasible solution using any
one of the three methods NWCM, LCM or VAM.
• Step-2:
• 1. Draw a closed path (or loop) from an unoccupied cell.
The right angle turn in this path is allowed only at
occupied cells and at the original unoccupied cell. Mark
(+) and (-) sign alternatively at each corner, starting
from the original unoccupied cell.
• 2. Add the transportation costs of each cell traced in the
closed path. This is called net cost change.
• 3. Repeat this for all other unoccupied cells.
 Continued
• Step-3: If all the net cost change are ≥0, an optimal solution
has been reached. Now stop this procedure. 2. If not then
select the unoccupied cell having the highest negative net cost
change and draw a closed path.
• Step-4: 1. Select minimum allocated value among all negative
position (-) on closed path
• 2. Assign this value to selected unoccupied cell (So unoccupied
cell becomes occupied cell).
• 3. Add this value to the other occupied cells marked with (+)
sign.
• 4. Subtract this value to the other occupied cells marked with (-)
sign.
• Step-5: Repeat Step-2 to step-4 until optimal solution is
obtained. This procedure stops when all net cost change ≥0 for
unoccupied cells.
Loop Pivoting
• Loop is an ordered sequence of at least four different cells
that satisfy all three conditions:
• Any two consecutive cells lie in either the same row or
same column.
• No three or more consecutive cells lie in the same row
or column.
• The last cell is in the same row or column as the first
cell.
Continued
Continued
• Let us start with any arbitrary empty cell (a cell without
allocation), say (3, 2) draw loop and allocate + 1 unit to this
cell.
• in order to keep up the column 2 restriction, -1 must be
allocated to cell (1, 2) and to keep up the row 1 restriction,
+1 must be allocated to cell (1,1) and consequently -1 must
be allocated to cell (3, 1); this is shown in the matrix below.
Continued
• The net change in transportation cost as a result of this
perturbation is called the evaluation of the empty cell in
question. Therefore,
• Evaluation of cell (3,2) = birr 100 x (8 x 1 – 5 x 1 + 2 x 1 –
5 x 1)
= birr. (0 x 100) =0

• Thus the total transportation cost increases by birr.0 for

each unit allocated to cell (3,2).
Continued
• Evaluation of the various empty cells (in hundreds of
rupees) are:
• Cell (1, 3) = c13-c33+c31-c11 = 11-15+5 = -1,
• Cell (1, 4) = c14-c34+c31-c11 = 7-9+5-2 = +1,
• Cell (2, 1) = c21-c24+c34-c31 = 1-1+9-5 = +4,
• Cell (2, 2) = c22-c24+c34-c31+c11-c12 = 0-1+9-5+2-3 = +2,
• Cell (2, 3) = c23-c24+c34-c33 = 6-1+9-15 = -1,
• Cell (3, 2) = c32-c31+c11-c12 = 8-5+2-3 = +2.

Select the unoccupied cell having the highest negative net cost
change i.e. cell (1,3) or cell (2, 3) and draw a closed path from
cell (1, 3) or cell (2, 3).
Continued
Continued
• Since cell evaluation is – 1 and 1 unit has been
reallocated, the total transportation cost should be down
by birr (100 x1) = birr 100. This can be verified by actually
calculating the total cost for the 2nd feasible solution.
• The total cost of transportation for this 2nd feasible solution
is
= birr (3x5 + 11x1 + 1x1 + 7x5 + 2x15 + 1x9) x 100
= 10,100 birr.
Check this Solution is Optimal
• Write down again the feasible solution in question (i.e.
second feasible solution)
Continued
• For this allocation matrix the transportation cost is
Z = (5x3 + 1x11 + 1x6 +1x15 + 2x9 + 7x5) x 100
= 10,000
The Modified Distribution (MODI) Method
• In the modified distribution method, cell evaluations of all the
unoccupied cells are calculated simultaneously and only one
closed path for the most negative cell is traced.
• Step-1: Find an initial basic feasible solution
• Step-2: Find ui and vj for rows and columns. To start
• a. assign 0 to ui or vj where maximum number of allocation in
a row or column respectively.
• b. Calculate other ui's and vj's using cij=ui+vj, for all
occupied cells.
• Step-3: For all unoccupied cells, calculate dij=cij-(ui+vj), .
• Step-4:Check the sign of dij
• a. If dij>0, then current basic feasible solution is optimal and
stop this procedure.
Continued
• b. If dij=0 then alternative solution exists, with different set
allocation and same transportation cost. Now stop this
procedure.
• c. If dij<0, then the given solution is not an optimal
solution and further improvement in the solution is
possible.
• Step-5: Select the unoccupied cell with the largest
negative value of dij, and included in the next solution.
• Step-6: Draw a closed path (or loop) from the unoccupied
cell (selected in the previous step). The right angle turn in
this path is allowed only at occupied cells and at the
original unoccupied cell. Mark (+) and (-) sign alternatively
at each corner, starting from the original unoccupied cell.
Continued
• Step-7: 1. Select the minimum value from cells marked
with (-) sign of the closed path.
• 2. Assign this value to selected unoccupied cell (So
unoccupied cell becomes occupied cell).
• 3. Add this value to the other occupied cells marked with
(+) sign.
• 4. Subtract this value to the other occupied cells marked
with (-) sign.
• Step-8: Repeat Step-2 to step-7 until optimal solution is
obtained. This procedure stops when all dij≥0 for
unoccupied cells.
Continued

The transportation cost associated with solution is

Z = (2x1) + (3x5) + (1x1) + (5x6) + (15x3) + (9x1) x100 =
10, 200 birr
Continued
• Step 1: Set up a cost matrix containing the unit cost
associated with the cells for which allocation have made.

• Step 2: introduce dual variable corresponding to the

supply and Demand constraints. Variable ui and vj are
such that ui + vj = cij for all occupied cells.
Continued
• u1 + v1 = 2 u3 + v1 = 5
• u1 + v2 = 3 u3 + v3 = 15
• u2 + v4 = 1 u3 + v4 = 9

Let v1 = 0. Therefore, from the above equations

u1 = 2, v2 = 1, u3 = 5, v3 = 10, v4 = 4 and u2 = -3
Step 3; : For all unoccupied cells, calculate dij=cij-(ui+vj),
D13 = 11 – (2+10) = -1 D23 = 6 –(-3+10)= -1
D14 = 7 – (2+4) = 1 D32 = 8 –(5+1)= 2
D21 = 1 – (-3+0) = 2
D22 = 0 – (-3+1) = 2
Continued

A negative value in an unoccupied cell indicate that a

better solution can be obtained by allocating units to this
cell.
Continued
Continued
• The total cost of transportation for this 2nd feasible solution
is = (3*5)+ (11*1)+(1*1)+(7*5)+(2*15)+(1*9) x 100
= 10,100
Check for optimality
The Unbalanced Transportation Model
• Thus far, the methods for determining an initial solution
and an optimal solution have been demonstrated within
the context of a balanced transportation model.
Realistically, however, an unbalanced problem is a more
likely occurrence.
• To compensate for the difference in the transportation
tableau, a “dummy” row or column is added to the
tableau.
• The additional demanded, which cannot be supplied, will
be allocated to a cell in the dummy row.
• The additional supply, which cannot be demanded, will be
allocated to a cell in the dummy column.
Degeneracy
• In all the tableaus showing a solution to the wheat
transportation problem, the following condition was met:
m row + n columns -1 = the number of cells with
allocation
• For example, in any of the balanced tableaus for milk
transportation, the number of row was three (i.e., m=3)
and the number of columns was four (i.e., n=4);
thus. 3+4 -1 = 6 cells with allocations.
This tableaus always have six cells with allocation; thus our
condition for normal solution was met. When the condition
is not met and fewer than m+n-1 cells have allocations, the
tableau is said to be degenerates. And no closed path
(loop) can be formed among them.
Continued
• Now allocate an infinitesimally small but positive value Ɛ
(Greek letter epsilon) to each of the chosen cells. Subscripts are
used when more than one such letter is required (e.ge., Ɛ1, Ɛ2,
Ɛ3, etc.).
• Notice that Ɛ is infinitesimally small and hence its effect can
be neglected when it is added to or subtracted from a
positive value ( e.g., 10 + Ɛ=10, 5- Ɛ=5, Ɛ+ Ɛ =2 Ɛ, Ɛ- Ɛ=0).
Transportation problem with Degeneracy
• A company has four warehouse and six stores. The
warehouses altogether have a surplus of 22 units of a
given commodity, divided among the as follows:
warehouse 1 2 3 4
Surplus 5 6 2 9
• The six stores altogether need 22 units of the commodity.
Individual requirements at stores 1, 2, 3, 4, 5, and 6 are 4,
4, 6, 2, 4, and 2 units respectively.
• Cost of shipping one unit of commodity from warehouse I
to store j in birr is given in the matrix.
Continued
1 2 3 4 5 6
1 9 12 9 6 9 10
2 7 3 7 7 5 5
3 6 5 9 11 3 11
4 6 8 11 2 2 10

i. How should the products be shipped from the

warehouse to the store that the transportation
cost is minimum?
Solution: Initial Basic Feasible Solution
1 2 3 4 5 6
1 9 12 9 6 9 10 5
2 7 3 7 7 5 5 6
3 6 5 9 11 3 11 2
4 6 8 11 2 2 10 9
4 4 6 2 4 2 Total 22

The supply and demand are balanced.

Initial basic feasible solution based on VAM method is
Z = (9*5)+ (3*4)+(5*2)+(6*1)+(9*1)+(6*3)+(2*2)+(2*4)
= 112
Perform Optimal test
• Number of allocation is m+n-1
• In the given situation m=4 n=6, m+n-1 = 4+6-1=9
• Now the number of allocations = 8 (<9). Therefore
optimality test cannot be performed as such. Such a
solution is called a degenerate solution.
• These m+n-1 allocation must be in independent positions.
• Since number of allocation is eight, there is a need for
making one infinitesimal allocation.
Continued
• Out of the unoccupied cells, cell (3,5) has the least cost of
birr 3. the infinitesimal allocation should be made in this
cell. However, the allocation Ɛ in this cell does not remain
in independent position.
• The cell chosen for allocating e must be of an
independent position. In other words, the allocation of Ɛ
should avoid a closed loop and should not have a path.
• There are two next higher cost cell viz. cell (2,5) and (3,2)
each with a cost of birr 5. allocation in either of these cells
does not result in closed loop.
Continued
1 2 3 4 5 6
1 5
2 4 Ɛ 2
3 1 1
4 3 2 4

Variable ui and vj are such that ui + vj = cij for all

occupied cells.
Let v1=0
Continued
• Initial cost matrix for the allocated cells
1 2 3 4 5 6
1 9
2 3 5 5
3 6 9
4 6 2 2

ui/vj 0 -6 3 -4 -4 4
6 9
9 3 5 5
6 6 9
6 6 2 2
Continued
• ui + vj matrix for non-allocated cells

ui/vj 0 -6 3 -4 -4 -4
6 6 0 . 2 2 2
9 9 . 12 5 . .
6 . 0 . 2 2 2
6 . 0 9 . . 2

3 12 . 4 7 8
-2 . -5 2 . .
. 5 . 9 1 9
. 8 2 . . 8

Cell evaluation matrix

Optimal Solution

• Initial basic feasible solution

Continued
1 2 3 4 5 6
1 5
2 4 +Ɛ Ɛ- Ɛ 2
3 1+Ɛ 1-Ɛ
4 3-Ɛ 2 4+Ɛ

1 2 3 4 5 6
1 5
2 4 Ɛ 2
3 1 1
4 3 2 4
This new allocation gives the same cost of transportation 112 birr