Transportation Problem

The transportation problem is a special type of linear programming problem, where the objective is
to minimize the cost of distributing a product from a number of sources to a number of destinations.

The transportation problem deals with a special class of linear programming problems in which the
objective is to transport a homogeneous product manufactured at several plants (origins) to a number
of different destinations at a minimum total cost. The total supply available at the origin and the total
quantity demanded by the destinations are given in the statement of the problem. The cost of shipping
a unit of goods from a known origin to a known destination is also given. Our objective is to determine
the optimal allocation that results in minimum total shipping cost.

Example 1: A firm has 3 factories - A, E, and K. There are four major warehouses situated at B, C, D,
and M. Average daily product at A, E, K is 30, 40, and 50 units respectively. The average daily
requirement of this product at B, C, D, and M is 35, 28, 32, 25 units respectively. The transportation
cost (in kshs.) per unit of product from each factory to each warehouse is given below:

Warehouse
Factory B C D M Supply
A 6 8 8 5 30
E 5 11 9 7 40
K 8 9 7 13 50
Demand 35 28 32 25

The problem is to determine a routing plan that minimizes total transportation costs.

• Let xij = no. of units of a product transported from ith factory (i = 1, 2, 3) to jth warehouse (j =
1, 2, 3, 4).
• It should be noted that if in a particular solution the xij value is missing for a cell, this means
that nothing is shipped between factory and warehouse.

The problem can be formulated mathematically in the linear programming form as

Minimize=6x11 +8x12 +8x13 +5x14+5x21 +11x22 +9x23 +7x24+ 8x31 + 9x32 + 7x33 + 13x34

Subject to
supply constraints
x11 +x12 +x13 +x14 =30
x21 +x22 +x23 +x24 =40
x31 + x32 + x33 + x34 = 50

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demand constraints
x11 +x21 +x31 =35
x12 +x22 +x32 =28
x13 +x23 +x33 =32
x14 + x24 + x34 = 25

xij ≥ 0

The above problem has 7 constraints and 12 variables. Since no. of variables is very high, simplex
method is not applicable. Therefore, more efficient methods have been developed to
solve transportation problems.

General Mathematical Model

For a feasible solution to exist, it is necessary that total supply equals total demand.

total supply = total demand.

Assumptions in Transportation Problem

• Only a single type of commodity is being shipped from an origin to a destination.

• Total supply is equal to the total demand.

• Si (supply) and Dj (demand) are all positive integers.

Basic Terminology: Transportation Problem

Origin: It is the location from which shipments are dispatched.
Destination: It is the location to which shipments are transported.
Unit Transportation cost: It is the cost of transporting one unit of the consignment from an origin to
a destination.
Perturbation Technique: It is a method used for modifying a degenerate transportation problem, so
that the degeneracy can be resolved.
Feasible Solution: A solution that satisfies the row and column sum restrictions and also the non-
negativity restrictions is a feasible solution.

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Basic Feasible Solution: A feasible solution of (m X n) transportation problem is said to be basic
feasible solution, when the total number of allocations is equal to (m + n – 1).
Optimal Solution: A feasible solution is said to be optimal solution when the total transportation cost
will be the minimum cost.
Methods for finding an initial basic feasible solution: Transportation Problem

1. North-west Corner Rule

2. Least Cost Method (Matrix Minimum Method)

1. North-West Corner Rule

The North-West corner rule is a method for computing a basic feasible solution of a transportation
problem, where the basic variables are selected from the North – West corner ( i.e., top left corner ).
Steps:

1. Select the top left corner (upper left-hand corner) cell of the transportation table and allocate as
many units as possible equal to the minimum between available supply and demand, i.e., min(s1,
d1).
2. Adjust the supply and demand numbers in the respective rows and columns.
3. If the demand for the first cell is satisfied, then move horizontally to the next cell in the second
column.
4. If the supply for the first row is exhausted, then move down to the first cell in the second row.
5. If for any cell, supply equals demand, then the next allocation can be made in cell either in the
next row or column.
6. Continue the process until all supply and demand values are exhausted.

Example 2: North-West Corner Rule - Transportation Problem

The Uasin Gishu county milk company has three plants located throughout the county with production
capacity 50, 75 and 25 litres. Each day the firm must furnish its four retail shops R1, R2, R3, & R4 with
at least 20, 20, 50, and 60 litres respectively. The transportation costs (in kshs.) are given below.
Plant Retail Shop Supply
R1 R2 R3 R4
P1 3 5 7 6 50
P2 2 5 8 2 75
P3 3 6 9 2 25
Demand 20 20 50 60
The economic problem is to distribute the available product to different retail shops in such a way so
that the total transportation cost is minimum
solution

Plant Retail Shop Supply

R1 R2 R3 R4
P1 3 5 7 6 50
P2 2 5 8 2 75
P3 3 6 9 2 25
Demand 20 20 50 60

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 Plant Retail Shop Supply
R1 R2 R3 R4
P1 3 (20) 5(20) 7(10) 6 50 30 10
P2 2 5 8 (40) 2(35) 75 35
P3 3 6 9 2(25) 25
Demand 20 20 50 40 60 25
Basic feasible = total number of allocations
Basic feasible = m+n-1 = 3+4-1 = 6
Total transportation cost = (3x20)+(5x20)+(7x10)+(8x40)+(2x35)+(2x25)
= 60+100+70+320+70+50
= 670
Example 2 Elaborated Solution.
Starting from the North-west corner, we allocate min (50, 20) to P1R1, i.e., 20 units to cell P1R1. The
demand for the first column is satisfied. The allocation is shown in the following table.
Table 1
Plant Retail Shop Supply
R1 R2 R3 R4
P1 5 7 6 50 30
P2 2 5 8 2 75
P3 3 6 9 2 25
Demand 20 20 50 60

Now we move horizontally to the second column in the first row and allocate 20 units to cell P1R2. The
demand for the second column is also satisfied.

Table 2
Plant Retail Shop Supply
R1 R2 R3 R4
P1 7 6 50 30 10
P2 2 5 8 2 75
P3 3 6 9 2 25
Demand 20 20 50 60

Proceeding in this way, we observe that P1R3 = 10, P2R3 = 40, P2R4 = 35, P3R4 = 25. The resulting feasible
solution is shown in the following table.

Final Table
Plant Retail Shop Supply
R1 R2 R3 R4
P1 6 50
P2 2 5 75

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 P3 3 6 9 25
Demand 20 20 50 60

Here, number of retail shops(n) = 4, and Number of plants (m) = 3

Number of basic variables = m + n – 1 = 3 + 4 – 1 = 6.

Initial basic feasible solution

The total transportation cost is calculated by multiplying each xij in an occupied cell with the
corresponding cij and adding as follows:

(20 X 3) + (20 X 5) + (10 X 7) + (40 X 8) + (35 X 2) + (25 X 2) = 670

Example 3: Luminous lamps has three factories: F1, F2, and F3 with production capacity 30, 50, and 20
units per week respectively. These units are to be shipped to four warehouses W1, W2, W3, and W4 with
requirement of 20, 40, 30, and 10 units per week respectively. The transportation costs (in kshs.) per
unit between factories and warehouses are given below.
Factory Warehouse Supply
W1 W2 W3 W4
F1 1 2 1 4 30
F2 3 3 2 1 50
F3 4 2 5 9 20
Demand 20 40 30 10

Find an initial basic feasible solution of the given transportation problem using north-west corner rule
and the way to distribute the available product to different warehouses in such a way so that the total
transportation cost is minimum.

Solution

Factory Warehouse Supply

W1 W2 W3 W4
F1 1 2 1 4 30
F2 3 3 2 1 50
F3 4 2 5 9 20
Demand 20 40 30 10

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 Factory Warehouse Supply
W1 W2 W3 W4
F1 1(20) 2(10) 1 4 30 10
F2 3 3(30) 2(20) 1 50 20
F3 4 2 5(10) 9 (10) 20 10
Demand 20 40 30 30 10 10
Basic solution = total number of allocations = 4+3-1 = 7-1 = 6
Total transportation cost = (20x1) + (10 x 2) + (30x3) + (20x2) + (10x5) + (10x9)
= 20 + 20 + 90 + 40 + 50 + 90
= 310
Example 3 Elaborated Solution.
Starting from the North-west corner, we allocate 20 units to F1W1. The demand for the first column is
completely satisfied.
Table 1
Factory Warehouse Supply
W1 W2 W3 W4
F1 2 1 4 30 10
F2 3 3 2 1 50
F3 4 2 5 9 20
Demand 20 40 30 10

Proceeding in this way, we observe that F1W2 = 10, F2W2 = 30, F2W3 = 20, F3W3 = 10, F3W4 = 10. An
initial basic feasible solution is exhibited below.

Final Table

Factory Warehouse Supply

W1 W2 W3 W4
F1 1 4 30
F2 3 1 50
F3 4 2 20
Demand 20 40 30 10

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Number of basic variables = m + n – 1 = 3 + 4 – 1 = 6.

Initial basic feasible solution

(20 X 1) + (10 X 2) + (30 X 3) + (20 X 2) + (10 X 5) + (10 X 9) = 310.

2. Least Cost Method

This method is also known as the matrix minimum method is a method for computing a basic feasible
solution of a transportation problem, where the basic variables are chosen according to the unit cost
of transportation. This method reduces the computation and the time required to determine the
optimal solution.
The following steps summarize the approach:
1. Identify the box having minimum unit transportation cost (cij).
2. If the minimum cost is not unique, then you are at liberty to choose any cell.
3. Choose the value of the corresponding xij as much as possible subject to the capacity and
requirement constraints.
4. Repeat steps 1-3 until all restrictions are satisfied.
Example 4: Consider the transportation problem presented in the following table:
Factory Retail Shop Supply
R1 R2 R3 R4
F1 3 5 7 6 50
F2 2 5 8 2 75
F3 3 6 9 2 25
Demand 20 20 50 60

Solution

Factory Retail Shop Supply

R1 R2 R3 R4
F1 3 5 7 6 50
F2 2 5 8 2 75
F3 3 6 9 2 25
Demand 20 20 50 60

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 Factory Retail Shop Supply
R1 R2 R3 R4
F1 3 5 (20) 7 (30) 6 50 30
F2 2(20) 5 8 2(55) 7555
F3 3 6 9 (20) 2(5) 25 20
Demand 20 20 50 20 60 5

Soln
Basic solution = total allocations = 4+3-1 = 7-1 = 6
Total transportation cost = (20x5) + (30x7) + (20x2) + (55x2) + (20x9) + (5x2)
= 100 + 210 + 40 + 110 + 180 + 10
= 650

Example 4 Elaborated Solution.

We observe that c21 =2, which is the minimum transportation cost. So x21 = 20. The demand for the
first column is satisfied. The allocation is shown in the following table.
Table 1
Factory Retail Shop Supply
R1 R2 R3 R4
F1 3 5 7 6 50
F2 5 8 2 75 55
F3 3 6 9 2 25
Demand 20 20 50 60

Now we observe that c24 =2, which is the minimum transportation cost, so x24 = 55. The supply for the
second row is exhausted.

Table 2

Factory Retail Shop Supply

1 2 3 4
1 3 5 7 6 50
2 5 8 75
3 3 6 9 2 25
Demand 20 20 50 60 5

Proceeding in this way, we observe that x34 = 5, x12 = 20, x13 = 30, x33 = 20. The resulting feasible
solution is shown in the following table.

Final Table

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 Factory Retail Shop Supply
1 2 3 4
1 3 6 50
2 5 8 75
3 3 6 25
Demand 20 20 50 60

Number of basic variables = m + n –1 = 3 + 4 – 1 = 6.

Initial basic feasible solution

The total transportation cost associated with this solution is calculated as given below:
(20 X 2) + (20 X 5) + (30 X 7) + (55 X 2) + (20 X 9) + (5 X 2) = 650.

In the previous section, we used matrix minimum method (Least cost method) to solve a
transportation problem. In this section, we provide another example. Let's concentrate on the
following example:

Example 5: Consider the transportation problem presented in the following table:

Factory Warehouse Supply
W1 W2 W3
F1 16 20 12 200
F2 14 8 18 160
F3 26 24 16 90
Demand 180 120 150

Solution

Factory Warehouse Supply

W1 W2 W3
F1 16 20 12 200
F2 14 8 18 160
F3 26 24 16 90
Demand 180 120 150

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 Factory Warehouse Supply
W1 W2 W3
F1 16 (50) 20 12 (150) 200 50
F2 14 (40) 8 (120) 18 160 40
F3 26 (90) 24 16 90
Demand 180 140 90 120 150

b.s = 3+3-1 = 6-1 = 5

t.t.c = (50x16) + (150x12) + (40x14) + (120x8) + (90x26)

= 800 + 3000 + 560 + 960 + 2340

= 6460

Solution.
We observe that F2W2 = 8, which is the minimum transportation cost and allocate 120 units to it. The
demand for the second column is satisfied.
Table 1
Factory Warehouse Supply
W1 W2 W3
F1 16 20 12 200
F2 14 18 160 40
F3 26 24 16 90
Demand 180 120 150 450

The resulting feasible solution is shown in the following table.

Final Table

Factory Warehouse Supply

W1 W2 W3
F1 20 200

F2 18 160

F3 24 16 90

Demand 180 120 150 450

Number of basic variables = m + n –1 = 3 + 3 – 1 = 5.
Initial basic feasible solution
The total transportation cost associated with this solution is calculated as given below:
(50 X 16) + (150 X 12) + (40 X 14) + (120 X 8) + (90 X 26) = 6460.

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Unbalanced Transportation Problem
In certain situations, the total supply is not equal to the total demand. Thus, the transportation
problem with unequal supply and demand is said to be unbalanced transportation problem.

How to solve?
If the total supply is more than the total demand, we introduce an additional column, which will
indicate the surplus supply with transportation cost zero. Similarly, if the total demand is more than
the total supply, an additional row is introduced in the table, which represents unsatisfied demand
with transportation cost zero. The balancing of an unbalanced transportation problem is illustrated in
the following example.

Example 6: Unbalanced Transportation Problem

Plant Warehouse Supply
W1 W2 W3
A 28 17 26 500
B 19 12 16 300
Demand 250 250 500

Solution

Plant Warehouse Supply

W1 W2 W3
A 28 17 26 500
B 19 12 16 300

Demand 250 250 500

Solution:
The total demand is 1000, whereas the total supply is 800.

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Total supply < total demand.
To solve the problem, we introduce an additional row with transportation cost zero indicating the
unsatisfied demand.
Plant Warehouse Supply
W1 W2 W3
A 28 (50) 17 26 (450) 500 50
B 19 12 (250) 16 (50) 300 50
Unsatisfied demand 0(200) 0 0 200
Demand 250 50 250 500 450 1000
b.s. = 3 + 3 – 1 = 6-1 = 5
t.t.c = (50x28) + (450x26) + (250x12) + (50x16) + (200x0)
= 1400 + 11700 + 3000 + 800 + 0
= 16900

Using least cost method, we get the following allocations.

Plant Warehouse Supply

W1 W2 W3
A 17 500

B 19 300

Unsatisfied demand 0 0 200

Demand 250 250 500 1000

Initial basic feasible solution

(50 X 28) + (450 X 26) + (250 X 12) + (50 X 16) + (200 X 0) = 16900.

Maximization Transportation Problem

There are certain types of transportation problems where the objective function is to be maximized
instead of being minimized.
These problems can be solved by converting the maximization problem into a minimization problem.
Example 7: Maximization Problem in Transportation
Kesses Ltd. has three factories: X, Y, and Z. It supplies goods to four dealers spread across the country.
The production capacities of these factories are 200, 500 and 300 per month respectively.
Factory Dealer Capacity
A B C D
X 12 18 6 25 200
Y 8 7 10 18 500
Z 14 3 11 20 300
Demand 180 320 100 400
Determine a suitable allocation to maximize the total net return.

Solution

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 Factory Dealer Capacity
A B C D
X 12 18 6 25 200
Y 8 7 10 18 500
Z 14 3 11 20 300
Demand 180 320 100 400

Solution.
Maximization transportation problem can be converted into minimization transportation problem by
subtracting each transportation cost from maximum transportation cost.
In example 7, the maximum transportation cost is 25. So, subtracting each value from 25, gives the
revised transportation problem is shown below.
Table 1
Factory Dealer Capacity
A B C D
X 13 7 19 0(200) 200
Y 17 (80) 18 (320) 15 (100) 7 500 400 320
Z 11(100) 22 14 5 (200) 300 100
Demand 180 80 320 100 400 200

soln
b.s = 4+3-1 = 7-1 = 6
t.t.c = (200x0) + (80x17) + (320x18) + (100x15) + (100x11) + (200x5)
= 0 + 1360 + 5760 + 1500 + 1100 + 1000
= 10720

An initial basic feasible solution is obtained by least cost method and is shown in the final table.

Final table

Factory Dealer Capacity

A B C D

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 X 13 7 19 200

Y 7 500

Z 22 14 300

Demand 180 320 100 400

The maximum net return is

(80 X 17)+(100 X 11)+(320 X 18)+(100 X 15)+(200 X 0)+(2005) = 10720

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