Guidelines for Model Formulation

 Understand the problem thoroughly.

 Write a verbal statement of the objective function and each
constraint.
 Define the decision variables.
 Write the objective function in terms of the decision
variables.
 Write the constraints in terms of the decision variables.

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A Note on Sunk Cost and Relevant Cost

 A resource cost is a relevant cost if the amount paid for it is
dependent upon the amount of the resource used by the decision
variables.

 Relevant costs are reflected in the objective function coefficients.

 A resource cost is a sunk cost if it must be paid regardless of the

amount of the resource actually used by the decision variables.

 Sunk resource costs are not reflected in the objective function

coefficients.

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 Example: Olympic Bike Co.

Olympic Bike is introducing two new

lightweight bicycle frames, the Deluxe and the
Professional, to be made from special aluminum
and steel alloys. The anticipated unit profits are
$10 for the Deluxe and $15 for the Professional.

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Example: Olympic Bike Co.

The number of pounds of each alloy needed

per frame is summarized below. A supplier
delivers 100 pounds of the aluminum alloy and 80
pounds of the steel alloy weekly. How many
Deluxe and Professional frames should Olympic
produce each week?

Aluminum Alloy Steel Alloy

Deluxe 2 3
Professional 4 2
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 Example: Olympic Bike Co.

 Model Formulation
• Verbal Statement of the Objective Function
Maximize total weekly profit.

• Verbal Statement of the Constraints

Total weekly usage of aluminum alloy < 100 pounds.
Total weekly usage of steel alloy < 80 pounds.

• Definition of the Decision Variables

x1 = number of Deluxe frames produced weekly.
x2 = number of Professional frames produced weekly.
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Example: Olympic Bike Co.

 Model Formulation (Continued)

Max 10x1 + 15x2 (Total Weekly Profit)

s.t. 2x1 + 4x2 < 100 (Aluminum Available)

3x1 + 2x2 < 80 (Steel Available)

x1, x2 > 0

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 Solved by POM Software

Step 1

Click start button and select POM for Windows button

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Solved by POM Software

Step 2
- Choose Linear Programming
Module

- Click New for writing new formulation

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 Solved by POM Software

Step 3
- Type the title of the problem, number of constraints and variables
- Choose type of objective function
- Choose format of the constraints’ name

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Solved by POM Software

Step 4
- Input the formulation to the POM Software
Max 10x1 + 15x2 (Total Weekly Profit)
s.t. 2x1 + 4x2 < 100 (Aluminum Available)
3x1 + 2x2 < 80 (Steel Available)
x1, x2 > 0

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 Solved by POM Software

Step 5
- Solve the formulation by clicking Solve Button

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Solved by POM Software

Step 6
- Interpret the result

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 Solved by POM Software

Step 7
- The graph can be displayed by maximizing Graph window

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Standard Computer Output

LP software packages, provide the following information
about the optimal solution:

• Optimal value of the objective function

• Information about the decision variables:

their optimal values


their reduced costs



• Information about the constraints:

the amount of slack or surplus


the dual prices



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 Standard Computer Output

LP software packages, also provide the following

information about the optimal solution:

• Objective function coefficient ranges (ranges of

optimality)

• Right-hand side ranges (ranges of feasibility)

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Example: Olympic Bike Co.

 Computer Output

OBJECTIVE FUNCTION VALUE = 412.500

Variable Value Reduced Cost

x1 15.000 0.000
x2 17.500 0.000

Constraint Slack/Surplus Dual Price

1 0.000 3.125
2 0.000 1.250

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 Example: Olympic Bike Co.
 Computer Output (Continued)

OBJECTIVE FUNCTION RANGES

Variable Lower Limit Current Value Upper Limit
x1 7.500 10.000 22.500
x2 6.667 15.000 20.000

RIGHTHAND SIDE RANGES

Constraint Lower Limit Current Value Upper Limit
1 53.333 100.000 160.000
2 50.000 80.000 150.000

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Example: Olympic Bike Co.

 Optimal Solution

According to the output:

x1 (Deluxe frames) = 15,
x2 (Professional frames) = 17.5, and
the objective function value = $412.50.

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 Sensitivity Analysis
 Sensitivity analysis (or post-optimality analysis) is used
to determine how the optimal solution is affected by
changes, within specified ranges, in:
• the objective function coefficients
• the right-hand side (RHS) values
• the constraint coefficients

 Sensitivity analysis is important to the manager who

must operate in a dynamic environment with imprecise
estimates of the coefficients.
 Sensitivity analysis allows her/him to ask certain what-if
questions about the problem.

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Reduced Cost
 The reduced cost for a decision variable whose value is 0
in the optimal solution is:
• the amount the variable's objective function coefficient
would have to improve (increase for maximization
problems, decrease for minimization problems) before
this variable could assume a positive value (e.g. come
into the solution).

 The reduced cost for a decision variable with a positive

value is 0.

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 Range of Optimality
 The range of optimality of an objective function
coefficient is found by
• determining an interval for the objective function
coefficient in which the original solution (the decision
does not change and the value of the objective
function is still optimal, even if it changes) remains
optimal while keeping all other data of the problem
constant.

 The value of the objective function might change in this

range of optimality.

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Example: Olympic Bike Co.

 Range of Optimality

Question: Suppose the profit on deluxe frames is increased

to $20.

• Is the solution obtained above still optimal?

• What is the value of the objective function when this unit

profit is increased to $20?

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 Example: Olympic Bike Co.
 Range of Optimality
Answer:
The output states that the solution remains optimal as
long as the objective function coefficient of x1 is between 7.5
and 22.5. Since 20 is within this range, the optimal solution
will not change. The optimal profit will change: 20x1 + 15x2
= 20(15) + 15(17.5) = $562.50.

OBJECTIVE FUNCTION RANGES

Variable Lower Limit Current Value Upper Limit
x1 7.500 10.000 22.500
x2 6.667 15.000 20.000

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Example: Olympic Bike Co.

 Range of Optimality
Question
If the unit profit on deluxe frames were $6 instead of
$10 would the optimal solution change?

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 Example: Olympic Bike Co.

 Range of Optimality
Answer
The output states that the solution remains optimal as
long as the objective function coefficient of x1 is between 7.5
and 22.5. Since 6 is outside this range, the optimal solution
would change.
OBJECTIVE FUNCTION RANGES
Variable Lower Limit Current Value Upper Limit
x1 7.500 10.000 22.500
x2 6.667 15.000 20.000

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Range of Optimality and 100% Rule

 The 100% rule states that:

 Simultaneous changes in objective function coefficients will

not change the optimal solution
as long as
the sum of the absolute values of the percentages of the
change
divided by the corresponding maximum allowable
change in the range of optimality for each coefficient
does not exceed 100%.

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 Example: Olympic Bike Co.
 Range of Optimality and 100% Rule

Question:
If simultaneously
• 1) the profit on Deluxe frames was raised to $16 and
• 2) the profit on Professional frames was raised to $17,
would the current solution be optimal?

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Example: Olympic Bike Co.

 Range of Optimality and 100% Rule
Answer
• If c1 = 16, the amount c1 changed is 16 - 10 = 6 . The
maximum allowable increase is 22.5 - 10 = 12.5, so this is
a 6/12.5 = 48% change.
• If c2 = 17, the amount that c2 changed is 17 - 15 = 2. The
maximum allowable increase is 20 - 15 = 5 so this is a 2/5
= 40% change.

• The sum of the change percentages is 88%. Since this is

less than 100% the optimal solution would not change.

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 Shadow Price
 A shadow price for a constraint’s right-hand side value is
the amount the objective function value will change per
unit increase in the right-hand side value of the
constraint.
 A shadow price reflects the value of an additional unit of
the resource if the resource cost is sunk.
 A shadow price reflects the extra value over the normal
cost of the resource when the resource cost is relevant.
 The shadow price for a non-binding constraint (one in
which there is positive slack or surplus when evaluated
at the optimal solution) is 0.

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Dual Price
 A dual price for a right-hand side (or resource limit) is the
amount the objective function will improve per unit
increase in the right-hand side value of a constraint.

 For maximization problems, dual prices and shadow prices

are the same.

 For minimization problems, shadow prices are the negative

of dual prices.

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 Range of Feasibility

 The range of feasibility for a change in a right-hand side

value is:

• the range of values for this parameter in which the

original shadow price remains constant.

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Range of Feasibility and 100% Rule

 The 100% rule states that:

simultaneous changes in right-hand sides will not change

the shadow prices as long as the sum of the percentages of
the changes divided by the corresponding maximum
allowable change in the range of feasibility for each right-
hand side does not exceed 100%.

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 Example: Olympic Bike Co.
 Range of Feasibility and Sunk Costs

Question

Given that aluminum is a sunk cost, what is the

maximum amount the company should pay for 50 extra
pounds of aluminum?

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Example: Olympic Bike Co.

 Range of Feasibility and Sunk Costs

Constraint Slack/Surplus Dual Price

1 0.000 3.125
2 0.000 1.250

RIGHTHAND SIDE RANGES

Constraint Lower Limit Current Value Upper Limit
1 53.333 100.000 160.000
2 50.000 80.000 150.000

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 Example: Olympic Bike Co.
 Range of Feasibility and Sunk Costs

Answer
Since the cost for aluminum is a sunk cost, the shadow
price provides the value of extra aluminum.

The shadow price for aluminum is the same as its dual

price (for a maximization problem). The shadow price for
aluminum is $3.125 per pound and the maximum allowable
increase is 60 pounds. Since 50 is in this range, then the
$3.125 is valid. Thus, the value of 50 additional pounds is =
50($3.125) = $156.25.

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Example: Olympic Bike Co.

 Range of Feasibility and Relevant Costs

Question

If aluminum were a relevant cost, what is the

maximum amount the company should pay for 50 extra
pounds of aluminum?

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 Example: Olympic Bike Co.
 Range of Feasibility and Relevant Costs

Answer

If aluminum were a relevant cost, the shadow price

would be the amount above the normal price of aluminum
the company would be willing to pay. Thus if initially
aluminum cost $4 per pound, then additional units in the
range of feasibility would be worth $4 + $3.125 = $7.125 per
pound.

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Solved by LINDO Software

Step 1

Click start button and select LINDO button

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 Solved by LINDO Software

Step 2 Max 10x1 + 15x2 (Total Weekly Profit)

- Input the formulation
s.t. 2x1 + 4x2 < 100 (Aluminum Available)
3x1 + 2x2 < 80 (Steel Available)
x1, x2 > 0

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Solved by LINDO Software

Step 3
- Solve the formulation by clicking Solve Button

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 Solved by LINDO Software

Step 4
- Interpret the result

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Solved by LINDO Software

 Optimal Solution
According to the output:
x1 (Deluxe frames) = 15,

x2 (Professional frames) = 17.5, and

Is it possible to have 17.5 bicycle?

Must be Integer
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 Modifying to Integer Problem

- Define x1 and x2 as Integer variable

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Modifying to Integer Problem

- Interpret the result

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 Modifying to Integer Problem
 Optimal Solution for Modifying Problem
According to the output:
x1 (Deluxe frames) = 14,
Make sense RESULT
Although it has
decreasing objective
function
Z=410
x2 (Professional frames) = 18, and

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Example 2
 Consider the following linear program:

Min 6x1 + 9x2 ($ cost)

s.t. x1 + 2x2 < 8

10x1 + 7.5x2 > 30
x2 > 2

x1, x2 > 0

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 Example 2
 Computer Output:
OBJECTIVE FUNCTION VALUE = …….

Variable Value Reduced Cost

x1 ……. …….
x2 ……. …….

Constraint Slack/Surplus Dual Price

1 ……. …….
2 ……. …….
3 ……. …….

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Example 2
 Computer Output (Continued):
OBJECTIVE COEFFICIENT RANGES
Variable Lower Limit Current Value Upper Limit
x1 ……. ……. ……..
x2 ……. ……. No Upper Limit

RIGHTHAND SIDE RANGES

Constraint Lower Limit Current Value Upper Limit
1 ……. ……. No Upper Limit
2 ……… ……... ……..
3 ……. ……. ……
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 Example 2
 Optimal Solution

According to the output:

• x1 = …….. and
• x2 = …….., and
• the objective function value = ………..

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Example 2
 Range of Optimality

Question

Suppose the unit cost of x1 is decreased to $4. Is the

current solution still optimal? What is the value of the
objective function when this unit cost is decreased to $4?

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 Example 2
 Range of Optimality

Answer
The output states that the solution remains optimal as
long as the objective function coefficient of x1 is between
…… and ……..

Since 4 is within this range, the optimal solution

(will/will not) change.

However, the optimal total cost will be affected: 4x1 +

9x2 = …………. + ……….. = $…………..

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Example 2
 Range of Optimality

Question
How much can the unit cost of x2 be decreased without
concern for the optimal solution changing?

Answer
The output states that the solution remains optimal as
long as the objective function coefficient of x2 does not fall
below ………...

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 Example 2
 Range of Optimality and 100% Rule

Question

If simultaneously the cost of x1 was raised to $7.5 and

the cost of x2 was reduced to $6, would the current solution
remain optimal?

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Example 2
 Range of Optimality and 100% Rule

Answer
If c1 = 7.5, the amount c1 changed is 7.5 - 6 = 1.5. The
maximum allowable increase is 12 - 6 = 6, so this is a
……../………= ………% change.
If c2 = 6, the amount that c2 changed is 9 - 6 = 3. The
maximum allowable decrease is 9 - 4.5 = 4.5, so this is a
……../…….. = ………% change.
The sum of the change percentages is ..…% + …..% =
……..%. Since this does not exceed 100% the optimal
solution (would/would not) change.

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 Example 2
 Range of Feasibility

Question

If the right-hand side of constraint 3 is increased by 1,

what will be the effect on the optimal solution?

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Example 2
 Range of Feasibility

Answer
A dual price represents the improvement in the
objective function value per unit increase in the right-hand
side. A negative dual price indicates a deterioration
(negative improvement) in the objective, which in this
problem means an increase in total cost because we're
minimizing.
Since the right-hand side remains within the range of
feasibility, there is (change/no change) in the optimal
solution. However, the objective function value increases
by $4.50.
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 The Effects of Degeneracy on
Range of Optimality analysis

 Degeneracy occurs when,

the Shadow Price = 0 for a Binding Constraint
 When Degeneracy is present, changes beyond the end-
points of the range of optimality do not necessarily mean
that a different solution will be optimal.
 Sensitivity analysis beyond the end-points of the range of
optimality necessitates re-solving the problem.

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Detecting the Presence of

Alternate Optimal Solutions

When you have a non-degenerate solution (The shadow

price is not equal to zero for all binding constraints)
And, you observe an allowable increase or decrease equal
to zero for one or more objective function coefficients,
Then, at least one alternative optimal solution exists!
Sadly, “Solver” won’t find it for you, however, other LP
software may!

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 Transportation, Assignment, and Transshipment
Problems
 The Transportation Problem:
• The Network Model and a
• Linear Programming Formulation

 The Assignment Problem:

• The Network Model and a
• Linear Programming Formulation

 The Transshipment Problem:

• The Network Model and a
• Linear Programming Formulation
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Transportation, Assignment, and Transshipment

Problems: “Network Models”

A network model is one which can be represented by

 a set of nodes,

 a set of arcs, and

 functions (e.g. costs, supplies, demands, etc.) associated

with the arcs and/or nodes.

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 More “Network Models”

 Transportation, assignment, and transshipment problems

of this chapter, as well as the

 shortest route, minimal spanning tree, and maximal flow

problems and

 PERT/CPM problems are all examples of network

problems.

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Transportation, Assignment,
and Transshipment Problems
 Each of these three models (transportation, assignment,
and transshipment models) can be formulated as linear
programs and solved by general purpose linear
programming codes.

 For each of the three models, if the right-hand side of the

linear programming formulations are all integers, the
optimal solution will be in terms of integer values for the
decision variables.

 However, there are many computer packages which

contain separate computer codes for these models which
take advantage of their network structure.
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 Transportation Problem

The transportation problem seeks to minimize the total

shipping costs of transporting goods

 from m origins (each with a supply si)

 to n destinations (each with a demand dj),

 when the unit shipping cost from an origin, i, to a

destination, j, is cij.

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Transportation Problem
Supply Shipping Cost Demand
c11
s1 1 1 d1
c12
c21 c13

s2 2 2 d2
c31

s3 3 3 d3

Sources Destinations
(Origins) Commodity (Sinks)
factories cement warehouses
refineries oil distribution center
groves oranges stores.
. .
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 Transportation Problem
 Problem Definition

1 D1=15
c11=6
S1=30 1 c12=2
c13=6
2 D2=18
c21=4
c22=9
S2=25 2
c23=5
3 D3=12

SOURCES DESTINATIONS

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Solved by POM Software

Step 1
-Choose Transportation
Module

-Click New for writing new Problem

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 Solved by POM Software

Step 2
- Type the title of the problem, number of Sources and Destinations
- Choose type of objective function
- Choose format of the name options

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Solved by POM Software

Step 3
-Input data to the POM Software
-Choose starting method

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 Solved by POM Software

Step 4
- Solve the formulation by clicking Solve Button

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Solved by POM Software

Step 5
- Interpret
the result

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 Transportation Problem: Special Situations
 LP Formulation Special Cases or Situations.
Special-case modifications to the linear programming
formulation can be made, such as:
• Minimum shipping guarantees from i to j:
xij > Lij
• Maximum route capacity from i to j:
xij < Lij
• Unacceptable routes:
delete the variable

CAN POM SOLVE THE PROBLEM? NO

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Transportation Problem Formulation

 LP Formulation
The linear programming formulation in terms of the amounts
shipped from the origins to the destinations, xij, can be written as:

Min cijxij
ij

s.t. xij < si for each origin i

j

xij = dj for each destination j

i

xij > 0 for all i and j

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 Transportation Problem Formulation
Objective Function
 Min cijxij
ij
Min 6x11+2x12 +6x13 +4x21+9x22 +5x23

Subject to
 xij < si for each origin i
j
x11+ x12 + x13 < 30
x21+ x22 + x23 < 25

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Transportation Problem Formulation

xij = dj for each destination j

i
x11+ x21 = 15
x12+ x22 = 18
x13+ x23 = 12

xij > 0 for all i and j

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 Solved by LINDO

- Input the formulation and solve

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Solved by LINDO

- Interpret the result

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 Adding Special Situations
 LP Formulation Special Cases or Situations.
Special-case modifications can be made, such as:
• Minimum shipping guarantees from i to j: xij > Lij
x22 > 5

• Maximum route capacity from i to j: xij < Lij

x12 < 10

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Adding Special Situations

- Add constraints to the formulation and solve it

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 Adding Special Situations

- Interpret the result

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More Complex Transportation Problem

- Six sources and six destinations

c11
S1=30 1 1 D1=15
c12
c21 c13
S2=25 2 2 D2=18
c31

S3=10 3 3 D3=12
c44
S4=15 4 c45 4 D4=20
c54 c46

S5=28 5 5 D5=25
c64

S6=14 6 6 D6=22
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 More Complex Transportation Problem

- Cost Data
Destination
Sources
1 2 3 4 5 6
1 6 2 6 7 4 2
2 4 9 5 3 8 5
3 5 2 1 9 7 4
4 7 6 7 3 9 2
5 2 3 9 5 7 2
6 5 5 2 2 8 1

HOWMANY VARIABLES AND CONSTRAINTS DO

THE PROBLEM HAVE?

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Why Use A Modeling Language - LINGO?

LINGO's modeling language can be expressed a problem in a natural
manner that is very similar to standard mathematical notation

Rather than entering each term of each constraint explicitly, we can

express a whole series of similar constraints in a single compact
statement
This leads to models that are much easier to maintain and
scale up

The data section allows you to isolate model's data from the formulation

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 How to Model Using LINGO :
2 Warehouses and 3 Demands Transp. Problem
Objective Function
Min 6x11+2x12 +6x13 +4x21+9x22 +5x23

or in mathematical notation
Min cijxij
ij

The equivalent LINGO statement is:

MIN = @SUM( LINKS(I,J): C(I,J) * X(I,J));
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How to model Using LINGO :

2 sources and 3 Destination Transportation Problem
•Supply Constraints
x11+ x12 + x13 < 30
x21+ x22 + x23 < 25

Mathematical notation
xij < si for each origin i
j

The equivalent LINGO statement is:

@FOR( WAREHOUSES( I):
@SUM( VENDORS( J): X( I, J)) <= CAPACITY( I));
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 How to model Using LINGO :
2 sources and 3 Destination Transportation Problem
•Demand Constraints
x11+ x21 = 15
x12+ x22 = 18
x13+ x23 = 12

Mathematical notation
xij = dj for each destination j
i

The equivalent LINGO statement is:

@FOR(VENDORS( J):
@SUM(WAREHOUSES( I): X( I, J)) = DEMAND( J));
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Solved by LINGO Software

Step 1

Click start button and select LINGO button

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 Solved by LINGO Software

Step 2
Input data AND save to
the LINGO Software

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Solved by LINGO Software

Step 3
Solve the formulation
by clicking Solve Button
OR Ctrl-S

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 Solved by LINGO Software

Step 4
- Interpret
the result

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How to Solve using LINGO : More Complex

Transportation Problem
- Six sources and Six destinations
c11
S1=30 1 1
c12 D1=15
c21 c13
S2=25 2
2 D2=18
c31
3
S3=10 3 D3=12
c44
S4=15 4 c45 4 D4=20
c54 c46

S5=28 5 5 D5=25
c64

S6=14 6 6 D6=22
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 How to Solve using LINGO : More Complex
Transportation Problem
-The model does not change
-ONLY add the data

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How to Solve using LINGO : More Complex

Transportation Problem
-Solve by clicking CTRL-S
-Interpret the result

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 Assignment Problem
 An assignment problem seeks to minimize the total cost
assignment of m workers to m jobs, given that the cost of
worker i performing job j is cij.
 It assumes all workers are assigned and each job is
performed.
 An assignment problem is a special case of a transportation
problem in which all supplies and all demands are equal to
1; hence assignment problems may be solved as linear
programs.
 The network representation of an assignment problem with
three workers and three jobs is shown on the next slide.

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Assignment Problem
 Problem Definition

C11=6
1 1
C12=2
C13=6

C21=4
C22=9
2 2
C23=5

C31=5
C32=2
3 C33=1 3

WORKERS JOBS
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 Solved by POM Software

Step 1
-Choose Assignment
Module

-Click New for writing new Problem

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Solved by POM Software

Step 2
- Type the title of the problem, number of Jobs and Machines
- Choose type of objective function
- Choose format of the name options

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 Solved by POM Software

Step 3
-Input data to the POM Software
-Solve the problem

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Solved by POM Software

Step 4
- Interpret
the result

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 Assignment Problem
 Linear Programming Formulation

Min cijxij
ij

s.t. xij = 1 for each worker i

j

xij = 1 for each job j

i
xij = 0 or 1 for all i and j.

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Solved by LINDO

- Input the formulation and solve CTRL-S

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 Solved by LINDO

- Interpret the result

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Solved by LINGO

-Input the formulation from

TRANSPORT Problem
-Only Change the DATA
(without changing the
variable names)

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 Solved by LINGO

- Interpret the result

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Assignment Problem--Special
Considerations:
Special considerations can include:

 A modification to the right-hand side of the first constraint

set can be made if a worker is permitted to work more than 1
job.
 number of workers does not equal the number of jobs — add
dummy workers/jobs with 0 assignment costs as needed.
(note: this may not be necessary if a worker/job is allowed
more than one job/worker)
 worker i cannot do job j — assign cij = +M (where +M = some
very large number--implying a very large cost!).

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 Assignment Problem
 Special Case - 1
1 C11=6 1
C12=2
C13=6
C21=4
2 C22=9 2
C23=5
C31=5
C32=2
3 3
C33=1
C41=7
C42=6
4
C43=7
WORKERS JOBS
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Assignment Problem
 Special Case – 2 : Worker no.3 can do two jobs

1 C11=6 1
C12=2
C13=6
C21=4
2 C22=9 2
C23=5
C31=5
C32=2
3 3
C33=1
C42=3
C41=7
C43=9 4

WORKERS JOBS
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 Assignment Problem
 Special Case – 3 : Worker no.1 can not do job no. 2

1 C11=6 1

C13=6
C21=4
2 C22=9 2
C23=5
C31=5
C32=2
3 3
C33=1
C42=3
C41=7
C43=9 4

WORKERS JOBS
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Transshipment Problem
 Transshipment problems are transportation problems in
which a shipment may move through intermediate nodes
(transshipment nodes)before reaching a particular
destination node.
 Transshipment problems can be converted to larger
transportation problems and solved by a special
transportation program.
 Transshipment problems can also be solved by general
purpose linear programming codes.
 The network representation for a transshipment problem
with two sources, three intermediate nodes, and two
destinations is shown on the next slide.
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 Transshipment Problem
 Network Representation
3 c36
c13 c37
s1 1 c14 6 d1
c15 c46
4 c47
c23 c24
c56 7 d2
s2 2
c25
5 c57

SOURCES INTERMEDIATE DESTINATIONS

NODES
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Transshipment Problem
 Linear Programming Formulation
xij represents the shipment from node i to node j

Min cijxij
ij

s.t. xij < si for each origin i

j

xik - xkj = 0 for each intermediate

i j node k

xij = dj for each destination j

i
xij > 0 for all i and j

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 Example: Transshipping
Thomas Industries and Washburn Corporation supply
three firms (Zrox, Hewes, Rockwright) with customized
shelving for its offices. They both order shelving from the
same two manufacturers, Arnold Manufacturers and
Supershelf, Inc.
Currently weekly demands by the users are 50 for Zrox,
60 for Hewes, and 40 for Rockwright. Both Arnold and
Supershelf can supply at most 75 units to its customers.
Additional data is shown on the next slide.

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Example: Transshipping
Because of long standing contracts based on past
orders, unit costs from the manufacturers to the suppliers
are:
Thomas Washburn
Arnold 5 8
Supershelf 7 4

The cost to install the shelving at the various locations

are:
Zrox Hewes Rockwright
Thomas 1 5 8
Washburn 3 4 4
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 Example: Transshipping
 Network Representation
ZROX
Zrox 50

5 1
75 Arnold Thomas 5
8 8

ARNOLD Hewes 60

3 4
7
Super Wash-
75 Shelf
4 Burn 4
Rock-
Wright 40

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Example: Transshipping
 Linear Programming Formulation
• Decision Variables Defined
xij = amount shipped from manufacturer i to supplier j
xjk = amount shipped from supplier j to customer k
where i = 1 (Arnold), 2 (Supershelf)
j = 3 (Thomas), 4 (Washburn)
k = 5 (Zrox), 6 (Hewes), 7 (Rockwright)

 Note: A common mistake in Formulation is to define the

decision variable as Xijk -- implying that you have 2x2x3 =
12 decisions, when in fact, you only have
(2x2) + (2x3) = 10 decisions.
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 Example: Transshipping
 Objective Function Defined

• Minimize Overall Shipping Costs:

Min 5x13 + 8x14 +
7x23 + 4x24 +
1x35 + 5x36 + 8x37 +
3x45 + 4x46 + 4x47

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Example: Transshipping
 Constraints Defined

Amount Out of Arnold: x13 + x14 < 75

Amount Out of Supershelf: x23 + x24 < 75
Amount Through Thomas: x13 + x23 - x35 - x36 - x37 = 0
Amount Through Washburn: x14 + x24 - x45 - x46 - x47 = 0
Amount Into Zrox: x35 + x45 = 50
Amount Into Hewes: x36 + x46 = 60
Amount Into Rockwright: x37 + x47 = 40

Non-negativity of Variables: xij > 0, for all i and j.

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 Solved by LINDO

- Input the formulation and solve CTRL-S

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Solved by LINDO

- Interpret the result

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 Solved by LINGO

-Input the formulation

to TRANSHIPMENT
Problem

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Solved by LINGO

-Interpret
the result

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 Transshipping - Extension
 Network Representation
Zrox 50

75 Arnold 5 Thomas 1 5
8 8
ARNOLD Hewes 60
50
Super 7 Wash- 3 4
75
Shelf 4 Burn 4 Rock-
Wright 40
8 8
80 Super
6 Wash- 3 5
Blow By 6 Rock-
4 Blue 65

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