HNDA 2nd Year

Operations Research
NP Wickramasekara
 Formulate a transportation problem
 Find initial basic feasible solution by following various
methods
 Find minimum transportation cost schedule
 Ascertain minimum transportation cost schedule
 Discuss appropriate method to make unbalanced
transportation problems balanced
 Examine prohibited and preferred routes
 Formulate and solve transportation problem
 Use the Modified Distribution Method (MODI) and
stepping-stone methods to get optimum solutions.
 The Concept of Transportation
 Transportation is one of special types of linear programming
models formulations. This helps to solve linear programming
problems known as network flow problems.
 The transportation model has special characteristics and
techniques compared to simplex method. These techniques
enable management scientists to develop very efficient
approaches for this type of problems.
 The model was first time applied by Hitchcock in petrol
industry in 1941.
 In late 1950, F.L. Hitchcock, G.B. Dantzig, T.C. Koopmans
W. Cooper and A. Charnes developed the model for
supplying a product from several factories to a number of
cities.
3
 The Concept of Transportation
 A product is transported from a number of sources to a
number of destinations at the minimum possible cost.
 Each source is able to supply a fixed number of units of
the product, and each destination has a fixed demand for
the product.
 The linear programming model has constraints for
supply at each source and demand at each destination.
 All constraints are equalities in a balanced
transportation model where supply equals demand.
 Constraints contain inequalities in unbalanced models
where supply does not equal demand.

4
 Transportation modelling is an iterative procedure for
solving problems that involve minimizing the cost of
shipping products from a series of sources to a series
of destinations.
 Origin Points (or sources) can be factories,
warehouses, car rental agencies or any other points
from which goods are shipped.
 Number of points of demand (destinations) are any
points that receive goods.
 Transportation models are useful when considering
alternative facility locations.
 The choice of a new location depends on which will
yield the minimum cost for the entire system
To use the transportation model we need to know the
following:
The origin points and the capacity or supply per period
at each.
The destination points and the demand per period at
each.
The cost of shipping one unit from each origin to each
destination .
 In a transportation problem we have “m” origins, with
origin “i” processing “ai” items and “n” destinations
(possibly different number from “m”) with destination
“j” requiring “bj” items, and with ai = bj.
6
We are given the mn costs associated with shipping one item
from any origin to any destination, and are asked to empty the
origins and fill the destinations in such a way that the total
cost is minimized.

The assignment problem is seen to be a special case of

transportation problem in which m = n, all the ai and bj are
unity.

The iterative routine to be presented as the mode of the

solution of the transportation problem involves a succession of
“feasible solutions” of gradually diminishing cost; eventually
the minimum achievable cost is reached, and the
corresponding feasible solution is optimal. 7
Supply Production cen. Consumption cen. Demand
--------- ----------------------- ------------------------ -----------
a1 b1
F1 D1

a2 b2
F2 D2

a3 b3
F3 D3

a4 b4
F4 D4

b5
Σai = Σbi D5
8 8
8
 Example of a transportation problem in a network format

Factories Warehouses
(Sources) (Destinations)

100 Units Colombo Hambantota 300 Units

300 Units Galle Jaffna 200 Units

300 Units Kandy Anuradhapura 200 Units

Capacities Shipping Routes Requirements

 Consumption Center

T1 T2 T3 T4 T5 Total
Supply
U1 C11 C12 C13 C14 C15 a1
X11 X12 X13 X14 X15
Production Center

U2 C21 C22 C23 C24 C25 a2

X21 X22 X23 X24 X25
U3 C31 C32 C33 C34 C35 a3
X31 X32 X33 X34 X35
U4 C41 C42 C43 C44 C45 a4
X41 X42 X43 X44 X45
Total b1 b2 b3 b4 b5
Demand

10
Three common techniques for developing initial
solutions are,
 North-west corner method (NWC)
 Least cost method and
Vogel’s approximation method (VAM).

The initial solution is evaluated using either the

stepping-stone method or the modified distribution
(MODI) method

11
 The Executive Furniture Corporation manufactures office
desks at three locations: D, E, F
 The firm distributes the desks through regional warehouses
located in A, B , C
 Estimates of the monthly production capacity of each factory
and the desks needed at each warehouse are shown in
following Figure.

TO
FROM A B C
D Rs 5 Rs 4 Rs 3
E Rs 8 Rs 4 Rs 3
F Rs 9 Rs 7 Rs 5
 Production costs are the same at the three factories so the
only relevant costs are shipping from each source to
each destination
 Costs are constant no matter the quantity shipped
 The transportation problem can be described as how to
select the shipping routes to be used and the number of
desks to be shipped on each route so as to minimize
total transportation cost
 Restrictions regarding factory capacities and warehouse
requirements must be observed
 The first step is setting up the transportation table
 Its purpose is to summarize all the relevant data and
keep track of algorithm computations
Transportation costs per desk for Executive Furniture
TO
A B C FACTORY
FROM
CAPACITY
D Rs 5 Rs 4 Rs 3 100

E Rs 8 Rs 4 Rs 3 300

F Rs 9 Rs 7 Rs 5 300

Where house
300 200 200 700
requirements
 Transportation table for Executive Furniture
D capacity
constraint

TO WAREHOUSE WAREHOUSE WAREHOUSE FACTORY

FROM AT A AT B AT C CAPACITY
5 4 3
FACTORY D 100

8 4 3
FACTORY E 300

9 7 5
FACTORY F 300

WAREHOUSE
300 200 200 700
REQUIREMENTS

Cell representing a
Total supply source-to-destination
Cost of shipping 1 unit C (E to C) shipping
from F factory to B and demand
warehouse assignment that could
warehouse demand be made
 In this table, total factory supply exactly equals total
warehouse demand
 When equal demand and supply occur, a balanced
problem is said to exist
 This is uncommon in the real world and we have
techniques to deal with unbalanced problems
 Once we have arranged the data in a table, we must establish an
initial feasible solution
 One systematic approach is known as the northwest corner rule
 Start in the upper left-hand cell and allocate units to shipping
routes as follows
1. Exhaust the supply (factory capacity) of each row before
moving down to the next row
2. Exhaust the demand (warehouse) requirements of each
column before moving to the right to the next column
3. Check that all supply and demand requirements are met.
 In this problem it takes five steps to make the initial shipping
assignments
 TO FACTORY
A B C
FROM CAPACITY
D 5 4 3
100 100

E 8 4 3
200 100 300

F 9 7 5
100 200 300

WAREHOUSE
300 200 200 700
REQUIREMENTS
 We can easily compute the cost of this shipping assignment
ROUTE
UNITS PER UNIT TOTAL
FROM TO SHIPPED x COST (Rs) = COST (Rs)
D A 100 5 500

E A 200 8 1,600

E B 100 4 400

F B 100 7 700

F C 200 5 1,000

4,200

 This solution is feasible but we need to check to see if it is optimal

 Vogel’s Approximation Method (VAM) is not as simple as
the northwest corner method, but it provides a very good
initial solution, often one that is the optimal solution
 VAM tackles the problem of finding a good initial solution
by taking into account the costs associated with each route
alternative
 This is something that the northwest corner rule does not
do
 To apply VAM, we first compute for each row and column
the penalty faced if we should ship over the second-best
route instead of the least-cost route
  The six steps involved in determining an initial VAM
solution are illustrated below.
VAM Step 1. For each row and column of the
transportation table, find the difference between the
distribution cost on the best route in the row or column
and the second best route in the row or column
 This is the opportunity cost of not using the best route
VAM Step 2. Identify the row or column with the greatest
opportunity cost, or difference (column A in this example)
VAM Step 3. Assign as many units as possible to the
lowest-cost square in the row or column selected
VAM Step 4. Eliminate any row or column that has been
completely satisfied by the assignment just made by
placing Xs in each appropriate square
VAM Step 5. Re-compute the cost differences for the
transportation table, omitting rows or columns eliminated
in the previous step.
VAM Step 6. Return to step 2 for the rows and columns
remaining and repeat the steps until an initial feasible
solution has been obtained
 Second VAM assignment with B’s requirements
satisfied
OPPORTUNITY
31 03 02 COSTS
TO TOTAL
FROM
A B C AVAILABLE
5 4 3
D 100 X X 100 1

8 4 3
E 200 300 1

9 7 5
F X 300 2

TOTAL REQUIRED 300 200 200 700

 Final assignments to balance column and row
requirements

TO TOTAL
FROM
A B C AVAILABLE
5 4 3
D 100 X X 100

8 4 3
E X 200 100 300

9 7 5
F 200 X 100 300

TOTAL REQUIRED 300 200 200 700

 We can easily compute the cost of this shipping assignment
ROUTE
UNITS PER UNIT TOTAL
FROM TO SHIPPED x COST (Rs) = COST (Rs)
D A 100 5 500

E B 200 4 800

E C 100 3 300

F A 200 9 1,800

F C 100 5 500

3,900

 This solution is feasible but we need to check to see if it is optimal

 Before starting the process of allocation, ensure that the
total of availability and demand is equal.
 The least cost method starts by making the first
allocation in the cell whose shipping cost (or
transportation cost) per unit is lowest.
 This lowest cost cell is loaded or filled as much as
possible in view of the origin capacity of its row and the
destination requirements of its column.
 We move to the next lowest cost cell and make an
allocation in view of the remaining capacity and
requirement of its row and column.
 In case there is a tie for the lowest cost cell during
any allocation, we can exercise our judgment and we
arbitrarily choose cell for allocation.
 The above procedure is repeated till all row
requirements are satisfied.

 TO
FROM
A B C TOTAL
AVAILABLE

5 4 3
D X X 100 100

8 4 3
E X 200 100 300

9 7 5
F 300 X X 300

TOTAL REQUIRED 300 200 200 700

 We can easily compute the cost of this shipping assignment
ROUTE
UNITS PER UNIT TOTAL
FROM TO SHIPPED x COST (Rs) = COST (Rs)
D c 100 3 300

E B 200 4 800

E C 100 3 300

F A 300 9 2,700

4,100

 This solution is feasible but we need to check to see if it is optimal

 The stepping-stone method is an iterative
technique for moving from an initial feasible
solution to an optimal feasible solution
 There are two distinct parts to the process
◦ Testing the current solution to determine if
improvement is possible
◦ Making changes to the current solution to obtain an
improved solution
 This process continues until the optimal solution
is reached
 There is one very important rule
 The number of occupied routes (or squares) must always be
equal to one less than the sum of the number of rows plus the
number of columns
 In the Executive Furniture problem this means the initial solution
must have 3 + 3 – 1 = 5 squares used

Occupied shipping = Number + Number of –1

routes (squares) of rows columns

 When the number of occupied rows is less than this, the solution is called degenerate
 The stepping-stone method works by testing each
unused square in the transportation table to see
what would happen to total shipping costs if one
unit of the product were tentatively shipped on an
unused route
 There are five steps in the process
1. Select an unused square to evaluate
2. Beginning at this square, trace a closed path back to
the original square via squares that are currently
being used with only horizontal or vertical moves
allowed
3. Beginning with a plus (+) sign at the unused square,
place alternate minus (–) signs and plus signs on each
corner square of the closed path just traced
4. Calculate an improvement index by adding together
the unit cost figures found in each square containing a
plus sign and then subtracting the unit costs in each
square containing a minus sign
5. Repeat steps 1 to 4 until an improvement index has
been calculated for all unused squares.
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.
 Warehouse A Warehouse B
 Evaluating the unused D-
5 4
Factory
B shipping route D 100
– +

+ 8 – 4
Factory
E 200 100

TO FACTORY
A B C
FROM CAPACITY
5 4 3
D 100 100

8 4 3
E 200 100 300

9 7 5
F 100 200 300

WAREHOUSE
300 200 200 700
REQUIREMENTS
We can now compute an improvement index (Iij) for
the D-B route
 We add the costs in the squares with plus signs and
subtract the costs in the squares with minus signs

D- B index = IDB = +Rs 4 – Rs 5 + Rs 8 – Rs 4 = + Rs 3

 This means for every desk shipped via the D- B route, total
transportation cost will increase by Rs 3 over their current
level
 We can now examine the D- C unused route which is
slightly more difficult to draw
 Again we can only turn corners at squares that
represent existing routes
 We must pass through the E- C square but we can
not turn there or put a + or – sign
 The closed path we will use is
+ DC – DA + EA – EB + FB – FC
D-C improvement index
= IDC = + Rs3 – Rs 5 + Rs 8 – Rs 4 + Rs7 – Rs 5 = + Rs4
 Opening the D- C route will not lower our total shipping costs
 Evaluating the other two routes we find
E - C index = I = + Rs 3 – Rs 4 + Rs 7 – Rs5 = + Rs1
EC

 The closed path is

F- A index + EC – EB + FB – FC
= IFA = + Rs 9 – Rs 7 + Rs 4 – Rs 8 = – Rs2

 The closed path is

+ FA – FB + EB – EA
 So opening the F- A route will lower our total transportation
costs
 In the Executive Furniture problem there is only one
unused route with a negative index (F-A)
 If there was more than one route with a negative index,
we would choose the one with the largest improvement
 We now want to ship the maximum allowable number
of units on the new route
 The quantity to ship is found by referring to the closed
path of plus and minus signs for the new route and
selecting the smallest number found in those squares
containing minus signs
 To obtain a new solution, that number is added to all
squares on the closed path with plus signs and subtracted
from all squares the closed path with minus signs
 All other squares are unchanged
 In this case, the maximum number that can be shipped is
100 desks as this is the smallest value in a box with a
negative sign (FB route)
 We add 100 units to the FA and EB routes and subtract
100 from FB and EA routes
 This leaves balanced rows and columns and an improved
solution
 Stepping-stone path used to evaluate route FA
TO FACTORY
A B C
FROM CAPACITY
5 4 3
D 100 100

8 4 3
– +
E 200 100 300

9 7 5
+ –
F 100 200 300

WAREHOUSE
300 200 200 700
REQUIREMENTS
 Second solution to the Executive Furniture problem

TO FACTORY
A B C
FROM CAPACITY
5 4 3
D 100 100

8 4 3
E 100 200 300

9 7 5
F 100 200 300

WAREHOUSE
300 200 200 700
REQUIREMENTS

 Total shipping costs have been reduced by (100 units) x (Rs 2 saved per
unit) and now equals Rs 4,000
 This second solution may or may not be optimal
 To determine whether further improvement is possible,
we return to the first five steps to test each square that
is now unused
 The four new improvement indices are
D to B = IDB = + Rs 4 – Rs5 + Rs8 – Rs4 = + Rs3
(closed path: + DB – DA + EA – EB)
D to C = IDC = + Rs3 – Rs5 + Rs9 – Rs5 = + Rs2
(closed path: + DC – DA + FA – FC)
E to C = IEC = + Rs3 – Rs8 + Rs9 – Rs5 = – Rs1
(closed path: + EC – EA + FA – FC)
F to B = IFB = + Rs7 – Rs4 + Rs8 – Rs9 = + Rs2
(closed path: + FB – EB + EA – FA)
 Third and optimal solution

TO FACTORY
A B C
FROM CAPACITY
5 4 3
D 100 100

8 4 3
E 200 100 300

9 7 5
F 200 100 300

WAREHOUSE
300 200 200 700
REQUIREMENTS
 This solution is optimal as the improvement indices
that can be computed are all greater than or equal to
zero

D to B = IDB = + Rs 4 – Rs5 + Rs9 – Rs5 + Rs3 – Rs4 = + Rs2

(closed path: + DB – DA + FA – FC + EC – EB)
D to C = IDC = + Rs3 – Rs5 + Rs9 – Rs5 = + Rs2
(closed path: + DC – DA + FA – FC)
E to A = IEA = + Rs8 – Rs9 + Rs5 – Rs3 = + Rs1
(closed path: + EA – FA + FC – EC)
F to B = IFB = + Rs7 – Rs5 + Rs3 – Rs4 = + Rs1
(closed path: + FB – FC + EC – EB)
 Total cost of third solution

ROUTE
DESKS PER UNIT TOTAL
FROM TO SHIPPED x COST (Rs) = COST (Rs)
D A 100 5 500
E B 200 4 800
E C 100 3 300
F A 200 9 1,800
F C 100 5 500
3,900
 The MODI (modified distribution) method allows us to
compute improvement indices quickly for each unused
square without 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
 If there is a negative improvement index, then only one
stepping-stone path must be found
 This is used in the same manner as before to obtain an
improved solution
 In applying the MODI method, we begin with an initial solution
obtained by using the northwest corner rule
 We now compute a value for each row (call the values U1, U2,
U3 if there are three rows) and for each column (V1, V2, V3) in
the transportation table
 In general we let

Ui = value for assigned row i

Vj = value for assigned column j
Cij = cost in square ij (cost of shipping from source i to
destination j)
1. Compute the values for each row and column, set

Ui + Vj = Cij
but only for those squares that are currently used or
occupied
2. After all equations have been written, set U1 = 0
3. Solve the system of equations for U and V values
4. Compute the improvement index for each unused square
by the formula
Improvement Index (Iij) = Cij – Ui – Vj
5. Select the best negative index and proceed to solve the
problem as you did using the stepping-stone method
 The initial northwest corner solution is repeated in Table
10.10
 Note that to use the MODI method we have added the Ui
(rows) and Vj (columns)

V1 V2 V3
Vj
TO FACTORY
Ui A B C
FROM CAPACITY
5 4 3
U1 D 100 100

8 4 3
U2 E 200 100 300

9 7 5
U3 F 100 200 300

WAREHOUSE
300 200 200 700
REQUIREMENTS

Table 10.10
 The first step is to set up an equation for each occupied
square
 By setting U1 = 0 we can easily solve for V1, U2, V2, U3,
and V3

(1) U1 + V1 = 5 0 + V1 = 5 V1 = 5
(2) U2 + V1 = 8 U2 + 5 = 8 U2 = 3
(3) U2 + V2 = 4 3 + V2 = 4 V2 = 1
(4) U3 + V2 = 7 U3 + 1 = 7 U3 = 6
(5) U3 + V3 = 5 6 + V3 = 5 V3 = –1
  The next step is to compute the improvement index for
each unused cell using the formula
Improvement index (Iij) = Cij – Ui – Vj
 We have
U1-V2 index IDB = C12 – U1 – V2 = 4 – 0 – 1
= +Rs 3

U1-V3 index IDC = C13 – U1 – V3 = 3 – 0 – (–1)

= +Rs 4
IEC = C23 – U2 – V3 = 3 – 3 – (–1)
U2-V3 index = +Rs 1
IFA = C31 – U3 – V1 = 9 – 6 – 5
U3-V1 index = –Rs 2
 The steps we follow to develop an improved solution after
the improvement indices have been computed are
1. Beginning at the square with the best improvement
index, trace a closed path back to the original square
via squares that are currently being used
2. Beginning with a plus sign at the unused square,
place alternate minus signs and plus signs on each
corner square of the closed path just traced
 3. Select the smallest quantity found in those
squares containing the minus signs and add
that number to all squares on the closed path
with plus signs; subtract the number from
squares with minus signs
4. Compute new improvement indices for this
new solution using the MODI method
 Note that new Ui and Vj values must be calculated
 Follow this procedure for the second and third
solutions
 Vj V1 V2 V3
TO FACTORY
Ui A B C
FROM CAPACITY
5 4 3
U1 D 100 100

8 4 3
U2 E - 200 100 300

9 7 5
U3 F 200 - 100 300

WAREHOUSE
300 200 200 700
REQUIREMENTS

Table 10.10
 Total cost

ROUTE
DESKS PER UNIT TOTAL
FROM TO SHIPPED x COST (Rs) = COST (Rs)
D A 100 5 500
E B 200 4 800
E C 100 3 300
F A 200 9 1,800
F C 100 5 500
3,900
 In real-life problems, total demand is frequently not
equal to total supply
 These unbalanced problems can be handled easily by
introducing dummy sources or dummy destinations
 If total supply is greater than total demand, a dummy
destination (warehouse), with demand exactly equal to
the surplus, is created
 If total demand is greater than total supply, we
introduce a dummy source (factory) with a supply
equal to the excess of demand over supply
 In either case, shipping cost coefficients of zero are assigned
to each dummy location or route as no goods will actually be
shipped
 Any units assigned to a dummy destination represent excess
capacity
 Any units assigned to a dummy source represent unmet
demand
 Initial solution to an unbalanced problem where
demand is less than supply
TO TOTAL
FROM
A B C
AVAILABLE
5 4 3
D 250

8 4 3
E 300

9 7 5
F 300

WAREHOUSE
300 200 200
REQUIREMENTS

Table 10.16
 Suppose that the factory increases its rate of production from
100 to 250 desks
 The firm is now able to supply a total of 850 desks each period
 Warehouse requirements remain the same (700) so the row and
column totals do not balance
 We add a dummy column that will represent a fake warehouse
requiring 150 desks
 This is somewhat analogous to adding a slack variable
 We use the northwest corner rule and either stepping-stone or
MODI to find the optimal solution
  Initial solution to an unbalanced problem where
demand is less than supply
TO DUMMY TOTAL
FROM
A B C WAREHOUSE AVAILABLE
5 4 3 0
D 250 250

8 4 3 0
E 50 200 50 300

9 7 5 0
F 150 150 300

WAREHOUSE
300 200 200 150 850
REQUIREMENTS

Table 10.16
New capacity
Total cost = 250(Rs 5) + 50(Rs 8) + 200(Rs 4) + 50(Rs 3) + 150(Rs 5) + 150(0) = Rs 3,350
 The second type of unbalanced condition occurs when
total demand is greater than total supply
 In this case we need to add a dummy row representing
a fake factory
 The new factory will have a supply exactly equal to the
difference between total demand and total real supply
 The shipping costs from the dummy factory to each
destination will be zero
 Unbalanced transportation table for Happy Sound Stereo
Company
TO
WAREHOUSE A WAREHOUSE B WAREHOUSE C
FROM
PLANT SUPPLY

6 4 9
PLANT W 200

10 5 8
PLANT X 175

12 7 6
PLANT Y 75

WAREHOUSE 450
250 100 150
DEMAND 500
  Initial solution to an unbalanced problem in which demand is
greater than supply

TO WAREHOUSE WAREHOUSE WAREHOUSE

PLANT SUPPLY
FROM A B C
6 4 9
PLANT W 200 200

10 5 8
PLANT X 50 100 25 175

12 7 6
PLANT Y 75 75

0 0 0
Dummy 50 50

WAREHOUSE
250 100 150 500
DEMAND

Total cost of initial solution = 200(Rs 6) + 50(Rs 10) + 100(Rs 5) + 25(Rs 8) + 75(Rs 6)
+ 50(0) = Rs 2,850
 Degeneracy occurs when the number of occupied squares
or routes in a transportation table solution is less than the
number of rows plus the number of columns minus 1
 Such a situation may arise in the initial solution or in any
subsequent solution
 Degeneracy requires a special procedure to correct the
problem since there are not enough occupied squares to
trace a closed path for each unused route and it would be
impossible to apply the stepping-stone method or to
calculate the U and V values needed for the MODI
technique
 To handle degenerate problems, create an artificially
occupied cell
 That is, place a zero (representing a fake shipment) in one
of the unused squares and then treat that square as if it were
occupied
 The square chosen must be in such a position as to allow all
stepping-stone paths to be closed
 There is usually a good deal of flexibility in selecting the
unused square that will receive the zero
 The Martin Shipping Company example illustrates degeneracy in
an initial solution
 They have three warehouses which supply three major retail
customers
 Applying the northwest corner rule the initial solution has only four
occupied squares
 This is less than the amount required to use either the stepping-
stone or MODI method to improve the solution (3 rows + 3
columns – 1 = 5)
 To correct this problem, place a zero in an unused square, typically
one adjacent to the last filled cell
 Initial solution of a degenerate problem
TO WAREHOUSE
CUSTOMER 1 CUSTOMER 2 CUSTOMER 3
FROM SUPPLY
8 2 6
WAREHOUSE 1 100 0 100

10 9 9
WAREHOUSE 2 0 100 20 120

7 10 7
WAREHOUSE 3 80 80

CUSTOMER
100 100 100 300
DEMAND

Table 10.19
Possible choices of
cells to address the
degenerate solution
 A transportation problem can become degenerate after the initial
solution stage if the filling of an empty square results in two or
more cells becoming empty simultaneously
 This problem can occur when two or more cells with minus signs
tie for the lowest quantity
 To correct this problem, place a zero in one of the previously filled
cells so that only one cell becomes empty
 Bagwell Paint Example
◦ After one iteration, the cost analysis at Bagwell
Paint produced a transportation table that was
not degenerate but was not optimal
◦ The improvement indices are
factory A – warehouse 2 index = +2
factory A – warehouse 3 index = +1
factory B – warehouse 3 index = –15
factory C – warehouse 2 index = +11

Only route with

a negative
index
 Bagwell Paint transportation table

TO WAREHOUSE WAREHOUSE WAREHOUSE

FACTORY
FROM 1 2 3
CAPACITY
8 5 16
FACTORY A 70 70

15 10 7
FACTORY B 50 80 130

3 9 10
FACTORY C 30 50 80

WAREHOUSE
150 80 50 280
REQUIREMENT

Table 10.20
  Tracing a closed path for the factory B –
warehouse 3 route
TO
WAREHOUSE 1 WAREHOUSE 3
FROM

15 7
FACTORY B 50
– +
3 10
FACTORY C 30 50
+ –

Table 10.21

 This would cause two cells to drop to zero

 We need to place an artificial zero in one of these cells to avoid
degeneracy
 It is possible for a transportation problem to have
multiple optimal solutions
 This happens when one or more of the improvement
indices zero in the optimal solution
 This means that it is possible to design alternative
shipping routes with the same total shipping cost
 The alternate optimal solution can be found by shipping
the most to this unused square using a stepping-stone
path
 In the real world, alternate optimal solutions provide
management with greater flexibility in selecting and
using resources
 If the objective in a transportation problem is to
maximize profit, a minor change is required in the
transportation algorithm
 Now the optimal solution is reached when all the
improvement indices are negative or zero
 The cell with the largest positive improvement index is
selected to be filled using a stepping-stone path
 This new solution is evaluated and the process continues
until there are no positive improvement indices
  Obtain the initial solution for the following
transportation problem using NWCR, Least
cost method and VAM.

Stores
P Q R Supply
Factories

A 2 7 4 5
B 3 3 1 8
C 5 4 7 7
D 1 6 2 14
deman 7 9 18
d
 A product is manufactured by four factories A, B, C
and D. The Unit production costs are Rs 2, Rs 3, Rs 1
and Rs5 respectively. Their daily production capacities
are 50, 70, 30 and 50 units respectively. These factories
supply the product to four stores P, Q, R and S. The
demand made by these stores are 25, 35, 105 and 20
Units transportation cost in rupees from each factory to
each store is given in the following table;
 Stores
P Q R S
Factories

A 2 4 6 11
B 10 8 7 5
C 13 3 9 12
D 4 6 8 3

Required
Determine the extent of deliveries from each of the factories to each of the stores
so that the total cost (production and transportation together) is minimum.
 A compressed Natural Gas (CNG) company has three plants
producing gas and four outlets. The cost of transporting gas
from different production plants to the outlets, production
capacity of each plant and requirement at different outlets is
shown in the following cost-matrix table:
Outlets Capacity of
Plants Production

A B C D

X 4 6 8 6 700

Y 3 5 2 5 400

Z 3 9 6 5 600

Requirement 400 450 350 500 1,700

The cost in the cost-matrix is given in thousand of rupees.

Required
Determine a transportation schedule so that the cost is minimized.
 Consider the following data for the transportation
problem and find the allocation so that the total
transportation cost is minimum.:

Factory Destination
Supply to be
exhausted
D1 D2 D3 D4
A 6 1 9 3 70

B 11 5 2 8 55

C 10 12 4 7 70

Demand
85 35 50 45
 The unit profit matrix based on four factories and three sales
depots of a company and unbalanced quantities of demand and
supply are tabulated below: The main object of the company is
to maximize profit. Assume that there is no profit in case of
surplus production.
Factories Sales Depots Supply (Nos.)

S1 S2 S3
F1 6 6 1 10
F2 -2 -2 -4 150
F3 3 2 2 50
F4 8 5 3 100
Demand (Nos.) 80 120 150

Required
Formulate the above as a usual transportation minimization problem
and find the initial solution by using Vogel’s Approximation Method
(VAM).
 Solve the following transportation problem to maximize the
profit.
Factories Sales Depots Supply (Nos.)

S1 S2 S3 S3
F1 15 51 42 33 23
F2 80 42 26 81 44
F3 90 40 66 60 33
Demand 23 31 16 30
(Nos.)