TRANSPORTATION PROBLEM

The transportation problem One of the most important and successful

applications of quantitative analysis to solving business problems has
been in the physical distribution of products, commonly referred to as
transportation problems. Basically, the purpose is to minimize the cost of
shipping goods from one location to another so that the needs of each
arrival area are met and every shipping location operates within its
capacity. However, quantitative analysis has been used for many
problems other than the physical distribution of goods. For example, it has
been used to efficiently place employees at certain jobs within an
organization. (This application sometimes is called the assignment
problem.) However, the special structure of the transportation problem
allows us to solve it with a faster, more economical algorithm than
simplex. Problems of this type, containing thousands of variables and
constraints, can be solved in only a few seconds on a computer. In fact,
we can solve a relatively large transportation problem by hand. There are
some requirements for placing an LP problem into the transportation
problem category.
Let us assume there are m sources supplying n destinations. Source
capacities, destinations requirements and costs of material shipping from
each source to each destination are given constantly. The transportation
problem can be described using following linear
programming mathematical model and usually it appears in
a transportation tableau.
There are three general steps in solving transportation problems.
We will now discuss each one in the context of a simple example. Suppose
one company has four factories supplying four warehouses and its
management wants to determine the minimum-cost shipping schedule for
its weekly output of chests. Factory supply, warehouse demands, and
shipping costs per one chest (unit)

Table-1 Data for Transportation Problem

At first, it is necessary to prepare an initial feasible solution, which may

be done in several different ways; the only requirement is that the
destination needs be met within the constraints of source supply.

The Transportation Matrix

The transportation matrix for this example appears above shows the
supply of availability at each factory is shown in the far right column and
the warehouse demands are shown in the bottom row. The unit shipping
costs are shown in the small boxes within the cells (see transportation
tableau at the initiation of solving all cells are empty). It is important at
this step to make sure that the total supply availabilities and total demand
requirements are equal. Often there is an excess supply or demand. In
such situations, for the transportation method to work, a dummy
warehouse or factory must be added. Procedurally, this involves inserting
an extra row (for an additional factory) or an extra column (for an ad
warehouse). The amount of supply or demand required by the dummy
equals the difference between the row and column totals.
In this case there is:
Total factory supply 51
Total warehouse requirements 52
This involves inserting an extra row - an additional factory. The amount of
supply by the dummy equals the difference between the row and column
totals. In this case there is 52 51 = 1. The cost figures in each cell of the
dummy row would be set at zero so any units sent there would not incur a
transportation cost. Theoretically, this adjustment is equivalent to the
simplex procedure of inserting a slack variable in a constraint inequality to
convert it to an equation, and, as in the simplex, the cost of the dummy
would be zero in the objective function.

Table-2 "Transportation Matrix for Chests Problem With an Additional Factory

(Dummy)"

Initial Feasible Solution

Initial allocation entails assigning numbers to cells to satisfy supply and
demand constraints. Next we will discuss several methods for doing
this: the Northwest-Corner method, Least-Cost method, and Vogel's
approximation method (VAM).
Table-3 shows a northwest-corner assignment. (Cell A-E was assigned
first, A-F second, B-F third, and so forth.) Total cost : 10*10 + 30*4 +
15*10 + 30*1 + 20*12 + 20*2 + 45*12 + 0*1 = 1220($).
Inspection of Table-3 indicates some high-cost cells were assigned and
some low-cost cells bypassed by using the northwest-comer method.
Indeed, this is to be expected since this method ignores costs in favor of
following an easily programmable allocation algorithm.
Table-4 shows a least-cost assignment. (Cell Dummy-E was assigned
first, C-E second, B-H third, A-H fourth, and so on.) Total cost : 30*3 + 25*6
+ 15*5 +10*10 + 10*9 + 20*6 + 40*12 + 0*1= 1105 ($).
Table-5 shows the VAM assignments. (Cell Dummy-G was assigned first,
B-F second, C-E third, A-H fourth, and so on.) Note that this starting
solution is very close to the optimal solution obtained after making all
possible improvements to the starting solution obtained using the
northwest-coner method. Total cost: 15*14 + 15*10 + 10*10 + 20*4 +
20*1 + 40*5 + 35*7 + 0*1 = 1005 ($).

Table-3

Northwest Corner Assignment

Table-4"Least

- Cost Assignment"

Table-5

"VAM Assignment"

Develop Optimal Solution

To develop an optimal solution in a transportation problem involves
evaluating each unused cell to determine whether a shift into it is
advantageous from a total-cost stand point. If it is, the shift is made, and
the process is repeated. When all cells have been evaluated and
appropriate shifts made, the problem is solved. One approach to making
this evaluation is the Stepping stone method.
The term stepping stone appeared in early descriptions of the method, in
which unused cells were referred to as "water" and used cells as
"stones" from the analogy of walking on a path of stones halfsubmerged in water. The stepping stone method was applied to the VAM
initial solution, as shown in Table-5
Table-6 shows the optimal solutions reached by the Stepping stone
method. Such solution is very close to the solution found using VAM
method.

Table-6 "Optimal Matrix, With Minimum Transportation Cost of $1,000."

Alternate Optimal Solutions

When the evaluation of any empty cell yields the same cost as the
existing allocation, an alternate optimal solution exists (see Stepping
Stone Method alternate solutions). Assume that all other cells are
optimally assigned. In such cases, management has additional flexibility
and can invoke non transportation cost factors in deciding on a final
shipping schedule.

Table-7 "Alternate Optimal Matrix for the Chest Transportation Problem, With Minimum
Transportation Cost of $1,000.

Degeneracy
Degeneracy exists in a transportation problem when the number of filled
cells is less than the number of rows plus the number of columns minus
one (m + n - 1). Degeneracy may be observed either during the initial
allocation when the first entry in a row or column satisfies both the row
and column requirements or during the Stepping stone method

application, when the added and subtracted values are equal. Degeneracy
requires some adjustment in the matrix to evaluate the solution achieved.
The form of this adjustment involves inserting some value in an empty cell
so a closed path can be developed to evaluate other empty cells. This
value may be thought of as an infinitely small amount, having no direct
bearing on the cost of the solution.
Procedurally, the value (often denoted by the Greek letter epsilon, - ) is
used in exactly the same manner as a real number except that it may
initially be placed in any empty cell, even though row and column
requirements have been met by real numbers. A degenerate
transportation problem showing a Northwest Corner initial allocation is
presented in Table-8, where we can see that if were not assigned to the
matrix, it would be impossible to evaluate several cells.
Once a has been inserted into the solution, it remains there until it is
removed by subtraction or until a final solution is reached.
While the choice of where to put an
is arbitrary, it saves time if it is
placed where it may be used to evaluate as many cells as possible without
being shifted.

Table-8 "Degenerate Transportation Problem With

Added. Number of filled cells = 4

Transportation Problem with a Maximization as a Criterion

A fictive corporation A has a contract to supply motors for all tractors

produced by a fictive corporation B. Corporation B manufactures the
tractors at four locations around Central Europe: Prague, Warsaw,
Budapest and Vienna. Plans call for the following numbers of tractors to be
produced at each location:

Prague 9 000
Warsaw 12 000
Budapest 9 000
Corporation A has three plants that can produce the motors. The plants
and production capacities are
Hamburg 8 000
Munich 7 000
Leipzig 10 000
Dresden 5 000
Due to varying production and transportation costs, the profit earns on
each motor depends on where they were produced and where they were
shipped. The following transportation table (Table-9) gives the accounting
department estimates of the euro profit per unit (motor).

Table-9 "The Euro Profit Per One Shipped Motor"

Table-10 shows a highest - profit assignment (Least Cost method

modification). In contrast to the Least Cost method it allocates as much
as possible to the highest-cost cell. Total profit : 3 335 000 euro.

Table-10 "Highest - Profit Assignment"

Applying the Stepping Stone method (modified for maximization

purposes) to the initial solution we can see that no other transportation
schedule can increase the profit and so the Highest Profit initial
allocation is also an optimal solution of this transportation problem.

The Transshipment Problem

The transshipment problem is similar to the transportation problem except

that in the transshipment problem it is possible to both ship into and out
of the same node (point). For the transportation problem, you can ship
only from supply points to demand points. For the transshipment problem,
you can ship from one supply point to another or from one demand point
to another. Actually, designating nodes as supply points or demand points
becomes confusing when you can ship both into and out of a node. You
can make the designations clearer if you classify nodes by their net stock
position-excess (+), shortage (-), or 0.
One reason to consider transshipping is that units can sometimes be
shipped into one city at a very low cost and then transshipped to other
cities. In some situations, this can be less expensive than direct
shipment.
Let's consider the balanced transportation problem as an example.
Picture-1 shows the net stock positions for the three warehouses and four
customers. Say that it is possible to transship through Pilsen to both
Innsbruck and Linz. The transportation cost from Pilsen to Innsbruck is 300
euro per unit, so it costs less to ship from Warsaw to Innsbruck by going
through Pilsen. The direct cost is 950 euro, and the transshipping cost is
600 + 300 = 900 euro. Because the transportation cost is 300 euro from
Pilsen to Innsbruck, the cost of transshipping from Prague through Pilsen
to Innsbruck is 400 euro per unit. It is cheaper to transship from Prague
through Pilsen than to ship directly from Prague to Innsbruck.

Picture-1 "Transshipment
in the Form of a Network

Example
Model"

There are two possible

conversions to a
transportation model.
In
the first conversion,
make
each excess node a
supply
point and each
shortage node a
demand
point. Then, find the
cheapest method of
shipping
from surplus nodes to
shortage nodes
considering all transshipment possibilities. Let's perform the first
conversion for the Picture-1 example. Because a transportation table
Prague, Warsaw, and Vienna have excesses, they are the supply points.
Because Krakow, Pilsen, Innsbruck, and Linz have shortages, they are the
demand points. The cheapest cost from Warsaw to Innsbruck is 900 euro,
transshipping through Pilsen. The cheapest cost from Prague to Innsbruck
is 400 euro, transshipping through Pilsen too. The cheapest cost from all
other supply points to demand points is obtained through direct shipment.

Table-11 shows the balanced transportation table for this transshipment

problem. For a simple transportation network, finding all of the cheapest
routes from excess nodes to shortage nodes is easy. You can list all of the
possible routes and select the cheapest. However, for a network with
many nodes and arcs, listing all of the possible routes is difficult.

Table-11 "The Transshipment Problem After Conversion to a Transportation Model"

The second conversion of a transshipment problem to a transportation

model doesn't require finding all of the cheapest routes from excess nodes
table to shortage nodes. The second conversion requires more supply and
demand nodes than the first conversion, because the points where you
can ship into and out of, occur in the converted transportation problem
twice first as a supply point and second as a demand point.

The Assignment Problem

Another transportation problem is the assignment problem. You can use

this problem to assign tasks to people or jobs to machines. You can also
use it to award contracts to bidders. Let's describe the assignment
problem as assigning n tasks to n people. Each person must do one and
only one task, and each task must be done by only one person. You
represent each person and each task by a node. Number the
people 1 to n, and number the tasks 1 to n. The assignment problem can
be described simply using a verbal model or using a linear
programming mathematical model .
For example, say that five groups of computer users must be trained for
five new types of software. Because the users have different computer
skill levels, the total cost of trainings depends on the assignments.

Table-12Cost of Trainings According to the Groups of Users

Picture-2 "Network Model for Assignment Problem"

Table-12 shows the cost of training for each assignment of a user group (A
through E) to a software type (S1 through S5). Picture-2 is a network
model of this problem.
A balanced assignment problem has the same number of people and
tasks. For a balanced assignment problem, the relationships are all equal.
Each person must do a task. For an unbalanced assignment problem with
more people than tasks, some people don't have to do a task and the first
class of constraints is of the type. In general, the simplex method does
not guarantee that the optimal values of the decision variables are
integers. Fortunately, for the assignment model, all of the corner point
solutions have integer values for all of the variables. Therefore, when the
simplex method determines the optimal corner point, all of the variable
values are integers and the constraints require that the integers be either
1 or 0 (Boolean).

Conversion to a Balanced Transportation Table

It's not surprising that the variable values for corner point solutions to the
assignment model are integers. The assignment model is a special case
of the transportation problem, and the transportation problem has
integer variable values for every corner point.
For the assignment model, the number of supply and demand points are
both n. The supply points correspond to each person, and the
demand points correspond to each task. Furthermore, every supply
amount is 1 and every demand amount is 1. There is one of each
person and one of each task.

Table-13 The Computer Users Assignment Problem in the Transportation Table Format

Table 7.13 represents the computer users assignment problem in the

balanced transportation table format. For the computer users assignment
problem, you minimize the total cost of training. Because number of users
= 5 and software types = 5, the transportation problem is balanced. You
can use standard method for initial solution finding (Northwest-Corner
method, Least-Cost method, or Vogel's approximation method (VAM) and
a SteppingStone method for developing an optimal solution.
Thinking of the transportation problem as shipping items between cities is
helpful, but it's the mathematical structure that is important. The
assignment problem has the same mathematical structure as the
transportation problem, even though it has nothing to do with shipping
units.

Note, that each feasible solution of assignment problem will always

be strongly degenerated (number of nonzero variables will always
be n).

7.9 Conclusion
The transportation problem is only a special topic of the linear
programming problems. It would be a rare instance when a linear
programming problem would actually be solved by hand. There are too
many computers around and too many LP software programs to justify
spending time for manual solution.( There are also programs that assist in
the construction of the LP or TP model itself. Probably the best known is
GAMSGeneral Algebraic Modeling System (GAMS-General, San
Francisco, CA). This provides a high-level language for easy representation
of complex problems.)