Unit VI-

The Transportation Problem

List of Content

6.1 Introduction
6.2 Formulation of Transportation Problem
6.3 The Transportation Algorithm
6.4 Methods for Finding Initial Basic Feasible Solution
6.4.1 Method 1- Least Cost Method
6.4.2 Method 2: North West Corner Method (NWCM)
6.4.3 Method 3: The Vogel’s Approximate Method
6.5 Moving Towards Optimality (MODI)
6.5.1 Degeneracy in Transportation Problem
6.6 Unbalanced Transportation Problem
6.7 Maximization in Transportation Problem
6.1 Introduction
The transportation problem is a special type of linear programming, to take care of
business issues have been in the physical distribution of products, regularly alluded to as
transportation problem. Essentially, the objective is to minimize the cost of transportation while
transporting the different products from its origin to their destination. The uncommon design of
the transportation problem permits us to settle it with a quicker, more prudent calculation than
simplex. Problem of this sort, containing a huge number of factors and imperatives, can be
tackled in almost no time on a computer. Indeed, we can solve relatively large transportation
problem by hand. There are two types of transportation problems
1. Balanced Transportation Problem- A transportation problem said to be a balanced
transportation problem if their supply and demand are equal.
2. Unbalanced Transportation Problem- A transportation problem said to be an unbalanced
transportation problem if the demand and supply are unequal.

Self assessment questions:

1. The main objective of transportation problem is to maximize the transportation cost. (True/
False)
2. If the demand of the destination is equal of the supply of the warehouse then the problem is
said to be balanced. (True/ False)
Answer Keys:
1. False 2. True

6.2 Formulation of Transportation Problem

As we discussed, Transportation models manages the transportation of an item
manufactured at various plants or production lines (supply origin) to various stockrooms or
warehouse (demand destination). The aim is to fulfill the destination requirements inside the
plant's ability with minimum transportation cost. Transportation models hence commonly
emerge in circumstances including actual development of merchandise from plants to
stockrooms, distribution centers to wholesalers, wholesalers to retailers and retailers to clients. A
transportation model requires the assurance of the number of units ought to be shipped from each
supply origin to each demand areas with the objective to fulfill all the demand with minimizing
transportation expenses. Suppose, there be m sources S1, S2, S3,…….Sm having ai (i= 1, 2,
3……..m) units of supplies or capacity respectively to be transported among n destinations D1,
D2, D3,….Dn with bj (j=1,2,3….n) units of requirements respectively. Let C ij be the cost of
transporting one unit of the item or product from source I to destination j respectively. If x ij
symbolize the units transported per route from i source to j destination, in that case the problem
is to determine the transportation schedule so as to minimize the total transportation cost
fulfilling the demand and supply conditions respectively. Mathematically, the problem may be
stated as follows:
m n
Minimize (Total cost) z=∑ ∑ cij xij
i=1 j=1

Subject to constraints
n

∑ x ij=b j , j=1 , 2 ,3 , … .. , n (Supply constraints)

j=1

∑ x ij=b j , j=1 , 2 ,3 , … … , n (Demand constraints)

i=1

x ij ≥ 0for all i∧ j
The above transportation problem is represented by a table as:
Table 1: Transportation Table
Origin(i)/Destination (j) D1 D2 D3 …. Dn Supply
(ai )
S1 (x11) (x12) (x13) …. (x1n) a1
C11 C12 C13 C1n
S2 (x21) (x22) (x23) …. (x2n) a2
C21 C 22 C23 C2n
S3 (x31) (x32) (x33) …. (x3n) a3
C31 C32 C33 C3n
….. ….. ….. ….. ….. …..

Sm (xm1) (xm2) (xm3) …. (xmn) am

Cm1 Cm 2 C34 Cmn
Demand (bj) b1 b2 b3 ---- bn
In the above transportation problem there are (m x n) decision variables and (m + n) constraints.

6.3 The Transportation Algorithm

6.4 Methods for Finding Initial Basic Feasible Solution

There are two methods of solving transportation methods. First one is simplex method
and second one is transportation method. In simplex method the solution is very lengthy, and the
process is very cumbersome due to the presence of large number of decision and artificial
variables. In transportation method the solution can be achieved by exploiting the special
structure of the problem. Here we will discuss about getting the initial basis solution through
transportation method.
There are mainly three methods for obtaining initial feasible solution to a transportation problem.
These are
1. Least Cost Method ( LCM)
2. North West Corner Method (NWCM)
3. Vogel’s Approximation Method (VAM)
Condition for obtaining initial basis feasible solution
 Demand of the destination should be equal to the supply of the factories i.e. matrix
should be balanced problem. If not then we need to introduce an imaginary (dummy)
origin/ destination, as the case maybe, to make the matrix a balanced one.
Let us discuss the methods one by one with the help of following example.

6.4.1 Method 1- Least Cost Method

The allocation as per LCM is very useful as it take into account the lowest cost and
therefore reduces the computation as well as the amount of time required to arrive the optimal
solution. Steps of the LCM are as follows:
Step 1: Formulate the problem
Step 2: Determine the smallest cost in the cost matrix of the transportation table and allocate as
much as possible so that either the capacity of the factory is exhausted or the destination
requirement is satisfied.
Let it be Cij. Allocate Xij = Min. (ai, bj) in the cell (i, j).
Step 3: a) If Xij = ai, cross off the ith row of the transportation table and decrease bi by ai and go to
Step III.
b) If Xij = bj, cross off the jth column of the transportation table and decrease ai by bj and
go to Step III.
c) If Xij = ai = bj, cross of either the ith row or the jth column but not the both.
Step 4: Repeat steps 2 & 3 for the resulting reduced transportation table until all the
requirements are satisfied. Whenever the minimum cost is not unique, make an arbitrary choice
among the minima.
The following example will illustrate the application of this method clearly.

Example: A computer manufacturer company has production facilities at Delhi and Chennai
with 250 and 160 computers available for shipment every month respectively. Furthermore the
firm has warehouses in Kolkata, Pune and Patna with demand for 100, 150, and 160 units per
month respectively. The transportation costs per unit from each factory to each warehouse are
given below. Formulate the problem and find the basis feasible solution with the help of Least
Cost Method.
Factory/ Warehouse Kolkata Pune Patna
Delhi 25 10 20
Chennai 14 15 16

Solution: Formulation of the transportation problem is as follows:

Factory/ Warehouse Kolkata Pune Patna Supply
Delhi 25 10 20 250
Chennai 14 15 16 160
Demand 100 150 160 410/410

Minimum transportation cost is 10 (Pune, Delhi), hence we allocate

Factory/ Warehouse Kolkata Pune Patna Supply
Delhi 25 10 (150) 20 250 100
Chennai 14 15 16 160
Demand 100 150 160 410/410
Now next minimum cost is 14 (Kolkata, Chennai), so we need to allocate here
Therefore we get,
Factory/ Warehouse Kolkata Pune Patna Supply
Delhi 25 10 (150) 20 250 100
Chennai 14 (100) 15 16 160 60
Demand 100 150 160 410/410

Now next minimum cost is 15 (Pune, Chennai), we due to exhaustion of particular demand side
we are unable to allocate, due to which we need to find next minimum cost and that is 16 (Patna,
Chennai). Therefore we need to allocate
We get,
Factory/ Warehouse Kolkata Pune Patna Supply
Delhi 25 10 (150) 20 250 100
Chennai 14 (100) 15 16 (60) 160 60
Demand 100 150 160 100 410/410

Next minimum cost is 20 (Patna, Delhi), hence we need to allocate here

Factory/ Warehouse Kolkata Pune Patna Supply
Delhi 25 10 (150) 20 (100) 250 100
Chennai 14 (100) 15 16 (60) 160 60
Demand 100 150 160 100 410/410

Hence total transportation cost = Rs. (10 x 150 +20 x 100 +14 x 100 +16 x 60)
= Rs. (1500 + 2000+ 1400 + 960)
= Rs. 5860

6.4.2 Method 2: North West Corner Method (NWCM)

North West Corner Method was developed by Dantzig, a famous mathematician. In this
method we start allocating from north-west corner. The steps of NWCM are mentioned below:
Step 1: The first assignment is made in the cell occupying the upper left-hand (North West)
corner of the transportation table. The maximum feasible amount is allocated there. That
is X11 = Min (a1, b1) and this value of X11 is then entered in the cell (1, 1) of the
transportation table.
Step 2: a) If b1>a1, we move down vertically to the second row and make the second allocation
of magnitude X21=Min. (a2, b1- X11) in the cell (2, 1).
b) If b1< a1, we move horizontally to the second column and make the second
allocation of magnitude X12 = Min. (a1-X11, b2) in the cell (1, 2).
c) If b1= a1, there is a tie for the second allocation, we can make the second allocation
in call either in the next row or next column.
Step 3: Repeat steps 1 and 2 by moving down towards the lower right corner of the
transportation table until all the rim requirements are satisfied.
The following example will illustrate the application of this method.

Example: Obtain an initial basic feasible solution to the following transportation problem by
North West Corner Method. Transportation costs from each source to various destinations are
given below:
Factory/ W1 W2 W3 W4 Supply
Warehouse
F1 20 15 25 15 15
F2 18 18 15 23 10
F3 32 28 18 43 12
Demand 10 3 9 15 37/37

Solution:
Since this is a balanced matrix i.e. supply is equal to demand, feasible solution exist.
: .Therefore, starting from north west corner, the first allocation is made at (F1, W1)
 Factory/ W1 W2 W3 W4 Supply
Warehouse
F1 20 (10) 15 (3) 25 (2) 15 15 5 2
F2 18 18 15 (7) 23 (3) 10 7 3
F3 32 28 18 43(12) 12
Demand 10 3 9 7 15 12 37/37

(Note Continuity of the chain in NWCM)

Transportation Cost= Rs. (20 x 10 +15 x 3 + 25 x 2 + 15 x 7 + 23 x 3 + 43 x 12)
= Rs. (200+ 45+50+105+69+516)
= Rs. 985

6.4.3 Method 3: The Vogel’s Approximate Method

Vogel’s approximation method is also known as penalty method and is more preferred to
the LCM and NWCM because it gives an initial solution which is nearer to an optimal solution
or the optimal solution itself. The VAM method takes into account not only the least cost Cij but
also the costs that just exceed Cij. Various steps of the method are given below:-
Step 1: For each row of the transportation table identify the smallest and the next to smallest
cost. Determine the difference between them for each row. These are called penalties
(opportunity cost). Put them along side of the transportation table by enclosing them in
parenthesis against the respective rows. Similarly compute these penalties for each
column.
Step 2: Identify the row or column with the largest penalty among all the rows and columns. If a
tie occurs, use any arbitrary tie breaking choice. Let the greatest penalty correspond
to ith row and let cij be the smallest cost in the ith row. Allocate the largest possible
amount Xij = min. (ai, bj) in the (i, j) of the cell and cross off the ith row or jth column in
the usual manner.
Step 3: Re-compute the column and row penalty for the reduced transportation table and go to
step 2. Repeat the procedure until all the requirements are satisfied.

Remarks:
 1. A row or column difference indicates the minimum unit penalty incurred by failing to
make an allocation to the smallest cost cell in that row or column.
2. It will be seen that VAM determines an initial basic feasible solution which is very close
to the optimum solution that is the number of iterations required to reach optimum
solution is minimum in this case.
Let’s take an example to get more clarity:-

Example: Three fertilizers factories P, Q and R located at different places of the country produce
10, 4 and 15 lakh tones of fertilizers respectively. Under the directive of the central government,
they are to be distributed to 3 States A, B and C as 15, 5 and 9 lakh respectively. The
transportation cost per tones in rupees is given below:

A B C
P 11 17 16
Q 15 12 14
R 20 12 15
Find out suitable transportation pattern at minimum cost by Vogel’s Approximation Method.

Solution:

For each row and column of the transportation table determine the penalties and put them along
side of the transportation table by enclosing them in parenthesis against the respective rows and
beneath the corresponding columns.
A B C Supply P1
P 11 17 16 10 (11-16)= 5
Q 15 12 14 4 (12-14)= 2
R 20 12 15 15 (12-15)= 3
Demand 15 5 9
P1 (11-15)= 4 (12-12)=0 (14-15)=1

Identify the row or column with the largest penalty among all the rows and columns and allocate
the largest transportation amount to the smallest cost correspondence to row and column.
Therefore, we get
A B C Supply P1
P 11 (10) 17 16 10 5
Q 15 12 14 4 2
R 20 12 15 15 3
Demand 15 5 5 9
P1 4 0 1

Now, Re-compute the column and row penalty for the reduced transportation table and go to step
II. Repeat the procedure until all the requirements are satisfied.

This exhausts the capacity and demand and hence the whole allocation is as under:

A B C Supply P1 P2 P3 P4 P5
P 11 (10) 17 16 10 5 --- --- --- ---
Q 15 (4) 12 14 4 2 2 --- --- ---
R 20 (1) 12 (5) 15 (9) 15 5 3 3 3 3 12
Demand 15 5 1 5 9
P1 4 0 1
P2 5 0 1
P3 20 12 15
P4 ---- 12 15
P5 ---- 12 ----

Transportation Cost= Rs.(11 x 10 +15 x 4 + 20 x 1+ 12 x 5 + 15 x 9)

= Rs. (110 + 60 + 20 + 60 + 135)
= Rs. 385

Self assessment question:

 1. To find initial feasible solution of a transportation problem the method which starts
allocation from the lowest cost is called_________ method.
2. Method of penalties in transportation problem is called __________.
3. The initial solution of a transportation problem can be obtained by applying ant method,
but the condition is to
a. the rim conditions are satisfied b. Solution be optimal
c. solution not to be degenerate d. all of the above
4. The method of finding an initial solution based upon opportunity costs is called _____.

Answer key:
1. Least cost 2. VAM 3. The rim conditions are satisfied 4. Vogel’s approximation
method

6.5 Moving Towards Optimality (MODI)

Modified Distribution Method (MODI) or (Ui - Vj) method is used to get the minimum
transportation cost for any transportation problem by drawing only closed path for the
unoccupied cell with highest opportunity.
Steps for getting optimality

Steps1: Determine the initial basis solution with the help of any one of the method discussed
above.
Step 2: Find out the value of dual variables i.e., ui and vj (ui+vj= cij)
Step 3: Calculate the opportunity cost of all the unoccupied cell with Δij = cij - (ui + vj)
Step 4: a) If the opportunity cost of all the unoccupied cell are +ve or 0, the solution is optimal.
b) If the opportunity cost come negative for one or more unoccupied cell, the given
solution in not optimal and there is a chance of further saving in transportation cost.
Step 5: Choose the unoccupied cell that is having the smallest negative opportunity cost.
Step 6: Draw a closed path or loop for the unoccupied cell selected in step 5.Considering that the
right angle turn in this path is permitted only at occupied cells and at the original
unoccupied cell.
Step 7: Allocate alternate plus and minus signs at the unoccupied cells on the corner points of the
closed path with a plus sign at the cell being evaluated.
Step 8: Determine, in this unoccupied cell how much maximum number of units can be
transported. The smallest value with negative sign on the path shows the number of units
that can be shipped to the entering cell. Therefore, add this to all the cell with positive
(plus) sign, and deduct it from all the cells with minus (negative sign). After applying
this, an unoccupied cell becomes an occupied cell.
Step 9: Repeat the procedure till the time will get optimal solution.

Example: The following table gives company to market shipping cost in Rs…, quantities
available in tons at each factory and quantities required in tons at each destination. Find the
optimum transportation schedule and cost.
Factory Destination Supply
M1 M2 M3 M4
F1 21 7 25 30 8
F2 10 4 18 15 24
F3 8 16 11 12 28
Demand 12 12 16 20 60

Solution:
In order to apply optimal transportation solution we need to get initial basis solution and for that
we are using least cost method. Hence the allocations are as follows:

M1 M2 M3 M4 Supply
F1 21 7 25 30 8
F2 10 4 18 15 24 12
F3 8 (12) 16 11 12 28 16

Demand 12 12 16 20 8 60/60

Initial Basis solution = Rs. ( 30 x 8 +4 x 12 +15 x 12 +8 x 12 +11 x 15)

=Rs. 729
Now, we need to move to next step for that we need to check m+n-1 should be equal to number
of allocations.
Here, 4+3-1≠ 5, hence degeneracy occurs.
Therefore, there is a need to allocating € those cell whose transportation cost is minimum.
In the above matrix the minimum unoccupied cost is 7(1, 2). However, allocating € to this
unoccupied cells forms a closed loop among the cells (1, 2), (1, 4), (2, 2) and (2, 4), such that
allocations in these cells do not remain in independent positions. Therefore, no allocation is
made in this unoccupied cell (1, 2). Next smallest cost cell is ( 2, 1) with transportation cost 10.
Let make the allocation here (2, 1).

M1 M2 M3 M4 Supply
F1 21 7 (€) 25 30 (8) 8
F2 10 (€) 4 (12) 18 15 (12) 24 12
F3 8 (12) 16 11 (16) 12 28 16

Demand 12 12 16 20 8 60/60

Now m + n -1 = number of allocation, hence apply optimality

6.5.1 Degeneracy in Transportation Problem

In m x n transportation problem, the number of row and number of column minus 1
should not be equal to the number of allocation then there is degeneracy.
Degeneracy can occur at two stages:
1. At the initial basis solution
2. During the testing of the optimal solution
To resolve degeneracy, allocate a very small quantity € (i.e. close to 0) to more or more than one
unoccupied cells that have a smallest transportation cost(s) so that a number of occupied cells
become m +n -1. The cost of € is so less that is does not affect the total transportation cost and
once we get the optimal transportation cost we remove €.
Example: Calculate the total optimal cost for the below mention matrix

Factory/ M1 M2 M3 M4 M5 Supply
 Warehouse
F1 13 11 15 20 12 8
F2 27 14 12 13 15 7
F3 18 18 15 12 14 12
Demand 6 4 5 4 8 27/27

Solution: For finding initial basic solution least cost matrix is applied

Factory/ M1 M2 M3 M4 M5 Supply
Warehouse
F1 13 11 (4) 15 20 12 (4) 8
F2 27 14 12 (5) 13 15 7
F3 18 (6) 18 15 12 (4) 14 (4) 12
Demand 6 4 5 4 8

Initial transportation cost = Rs. (11 x 4 + 12 x 4 + 12 x 5 + 18 x 6 +12 x 4 + 14 x 4)

For optimality need to apply MODI, calculate the value of ui and vj,
m + n-1≠ no of allocation, therefore need of allocating € to least cost 13 (2,4)

Factory/ M1 M2 M3 M4 M5 ui
Warehouse
F1 13 11 (4) 15 20 12 (4) U1= 9
F2 27 14 12 (5) 13 (€) 15 U2= 12
F3 18 (6) 18 15 12 (4) 14 (4) U3=11
vj V1= 7 V2= 2 V3= 0 V4= 1 V5= 3

Need to check for unoccupied cell

Cell Cost-(ui+ vj) Value
(1, 1) 13- (9+ 7) -3
 (1, 3) 15- (9 + 0) 6
(1,4) 20- (9+1) 10
(2,1) 17– (12 +7) -2
(2,2) 14 –( 12+2) 0
(2,5) 15- (12+ 3) 0
(3,2) 18- (11+2) 5
(3,3) 15- (11+0) 4

Here, there are three negative values. So need to make the loop from that unoccupied cell who is
having the smallest negative opportunity cost i.e. (1,1), with value -3. The modified
matrix is
Factory/ M1 M2 M3 M4 M5 ui
Warehouse
F1 (+) (-) U1= 9
13 * 11 (4) 15 20 12 (4)
F2 27 14 12 (5) 13 (€) 15 U2= 12

F3 18 (6) 18 15 12 (4) 14 (4) U3=11

(-) (+)
vj V1= 7 V2= 2 V3= 0 V4= 1 V5= 3

We get,
Factory/ M1 M2 M3 M4 M5
Warehous
e
F1 13 (4) 11 (4) 15 20 12
F2 27 14 12 (5) 13 (€) 15
F3 18 (2) 18 15 12 (4) 14 (8)

Hence transportation cost= Rs. ( 13 x 4 + 11 x 4 + 12 x 5 + 13 x € +18 x 2 + 12 x4 +14 x 8)

=Rs. 352 + 13€
 =Rs. 365

6.6 Unbalanced Transportation Problem

A matrix is said to be unbalanced if the total number of supply or availability of the
origin is not equal to the total number of demand or requirement of the destination. In such type
of problems, first we need to convert unbalanced matrix into the balanced one. If total number of
supply is more than the total number of demand then there is a need to introduce a additional
column with zero cost, the excess is entered as a rim requirement for this dummy destination and
in the case when demand is more than supply then an additional row is going to be introduced in
order to make a balanced matrix, the excess is entered as a rim requirement for this dummy
source and rest procedure is same as discussed previously.

Example: Solve the following transportation problem in order to get initial basis solution. The
matrix is as follows:
Factory/ D1 D2 D3 D4 Supply
Warehouse
X1 30 15 25 10 50
X2 5 18 5 13 10
X3 15 20 8 22 20
Demand 10 30 19 15 74/80

Solution:
In the above question Demand of the destination is not equal to the supply of the factory.
Therefore we need to introduce a dummy having all the transportation cost equal to zero and
having the demand equal to (80-74)= 6 units.

Factory/ D1 D2 D3 D4 Dummy Supply

Warehouse
X1 30 15 25 10 0 50
X2 5 18 5 13 0 10
X3 15 20 8 22 0 20
 Demand 10 30 19 15 6 74/80

Using NWCM to the IBFS

Factory/ D1 D2 D3 D4 Dumm Supply
Warehouse y

X1 30 (10) 15 (30) 25 (10) 10 0 50 40 10

X2 5 18 5 (9) 13(1) 0 10 1
X3 15 20 8 22 (14) 0 (6) 20 6
Demand 10 30 19 9 15 14 6 74/80

Transportation Cost= Rs. ( 30 x 10 + 15 x 30 + 25 x 10 + 5 x 9 + 13 x 1 + 22 x 14 + 0 x 6)

= Rs. (300 + 450 + 250 + 45 + 12 + 308 + 0)
= Rs. 1365

6.7 Maximization in Transportation Problem

The main objective of transportation problem is to minimizing the transportation cost but
sometime the objective function is to maximize instead of minimizing. These problems can be
solved by converting the maximization problem into minimizing one by subtracting the highest
amount in the transportation matrix. The modified transportation matrix can be solved by usual
manner as discussed.

Example: Solve the following transportation problem for maximum profit:

Factory/ D1 D2 D3 Supply
Warehouse
X1 30 15 65 50
X2 55 48 45 10
Demand 5 30 25 60/60

Solution: The transportation matrix is of maximization so need to convert it by subtracting the

highest cell value i.e. 65 from rest of the cells. Therefore we get,
 Factory/ D1 D2 D3 Supply
Warehouse
X1 35 50 0 50
X2 10 17 20 10
Demand 5 30 25 60/60

Now in order to get the initial basic solution apply any of the method and for optimality apply
MODI as discussed.

6.8 Summary
 Transportation problem help in minimizing the transportation cost while doing
physical distribution of the goods from its origin to its destination.
 There are three different methods to find out the initial basic solution of any
transportation problem.
 Two types of transportation problem are balanced and unbalanced.
 To achieve the optimality MODI method is used, if m+n-1 = no of allocation the
problem is non-degenerate. And in case of degeneracy we need to remove the
problem of degeneracy by allocating € to the least cost cell.
 In case of unbalanced transportation problem there is a need of converting it to
balanced by adding the dummy with zero cost.
 In maximization matrix there is a need of converting the maximization to
minimizing matrix by subtracting the highest cost from rest off the cost.
Self Assessment Question:
1. Dummy source or dummy destination will occur in the case of__________________.
2. In a transportation problem, we must make the number of __________ and_______equal.
3. By north-‐west corner rule we always get a _________basic feasible solution.

Answer Key: 1. Unbalanced problem 2. Demand, Supply 3. Vogel’s approximation

method 4. initial

Short Questions:
1. What is Transportation problem?
2. State different methods to obtain the initial basic feasible solution.
3. What are the properties of non-‐degenerate solution?
Answer:

1. Transporting the physical goods from its origin place to its final destination is called
transportation problem with the objective to minimize the shipping cost is called
transportation cost.
2. There are three basic methods for calculating initial basic solution they are least cost
method, North West corner method and Vogel’s approximation method.
3. Addition of number of rows and number of column minus 1 should be equal to the number
of allocation.

Long Question:

1. A company has factories at A, B & C which supply warehouses to X, Y and Z W3.

Weekly factory capacities are 150, 70 and 80 units respectively. Weekly warehouses
requirements are 70, 90 and 140 units respectively. Unit shipping costs ( in rupees) are
as follows. Find the optimal solution to the following transportation problem with
using VAM
Sources Destination Supply
X Y Z
A 2 7 4 150
B 3 6 7 70
C 5 4 1 80
Demand 70 90 140

Solution: In order to get the initial basic solution as per the problem requirement VAM is
applied.
Factory/ X Y Z Supply P1 P2 P3 P4
Warehouse
A 2 (70) 7 (20) 4 (60) 150 90 20 2 2 5 7
B 3 6 (70) 7 70 3 3 3 6
C 5 4 1 (80) 80 3 -- -- --
Demand 70 90 70 140 60 300/300
P1 1 2 3
P2 1 1 3
P3 1 1 --
P4 --- 1 ---
 Transportation cost = Rs. (2 x 70 + 7 x 20 + 4 x 60 + 6 x 70 + 1 x 80)
= Rs. 140 + 140 + 240 + 420 + 80)
= Rs. 1,020
Moving towards optimality, applying MODI
m + n-1 = number of allocation
3+ 3 -1 = 5, calculate the value of ui and vj
Factory/ X Y Z ui
Warehouse
A 2 (70) 7 (20) 4 (60) U1= 0
B 3 6 (70) 7 U2= -1
C 5 4 1 (80) U3= -3
Vj V1= 2 V2=7 V3=4

For unoccupied cell

Cell Cost-(ui + vj)
(B,X) 3 - (-1 +2)= 2
(B,Z) 7 – (-1 + 4)= 4
(C,X) 5 –( -3 + 2) = 4
(C,Y) 4 –( -3 + 7 )= 0

All the unoccupied cells are having the positive value

Hence optimal transportation cost = Rs. (2 x 70 + 7 x 20 + 4 x 60 + 6 x 70 + 1 x 80)
= Rs. 1,020

Suggested Books and References

 Operations Management: Theory and Practice by B. Mahadevan

 Operations Research by S. jaisankar
 Operations Research by PK Gupta
 Operations Research by DR. Akshaya
 Operations Research by R.K. Gupta