Transportation Problem

Transportation Models
To accompany Quantitative Analysis for Management, Eleventh Edition, Global Edition by Render, Stair, and Hanna Power Point slides created by Brian Peterson
The Transportation Problem

The transportation problem deals with the
distribution of goods from several points of supply (sources) to a number of points of demand (destinations).
Usually we are given the capacity of goods at each
source and the requirements at each destination.

Typically the objective is to minimize total
transportation and production costs.
Copyright 2012 Pearson Education
9-2

Example:
Given is a transportation problem with the following cost, supply and demand.
FROM FACTORIES 1 2 3 DEMAND TO WAREHOUSES SUPPLY
A
6 7 4 200
B
8 11 5 100
C
10 11 12 300 150 175 275 600
9-3

Network Representation of a Transportation Problem, with Costs, Demands and Supplies
Factories (Sources) 1
$7 $6 $8 $10 $11 $11 $5
Supply 150 Units
Warehouses (Destinations) A
Demand 200 Units
175 Units
2
$4
100 Units
275 Units
$12
300 Units
9-4
A General LP Model for Transportation Problems

Let: Xij = number of units shipped from source i to
destination j.
cij = cost of one unit from source i to
destination j.
si = supply at source i. dj = demand at destination j.
9-5
A General LP Model for Transportation Problems

Minimize cost = Subject to:
i = 1, 2,, m. j = 1, 2, , n. xij 0 for all i and j.
9-6
Linear Programming for the Transportation Example

Construct an LP model for the transportation
problem. SOLUTION:
Let Xij = number of units shipped from factory i to
warehouse j,
Where:
i = 1, 2, 3 j = A, B, C
9-7
Linear Programming for the Transportation Example

Minimize total cost = 6X1A + 8X1B + 10X1C +
7X2A + 11X2B + 11X2C + 4X3A +5X3B + 12X3C

Subject to:
X1A + X1B + X1C = 150 (Factory 1 supply) X2A + X2B + X2C = 175 (Factory 2 supply)
X3A + X3B + X3C = 275 (Factory 3 supply)

XA1 + XB1 + XC1 = 200 (Warehouse A demand) XA2 + XB2 + XC2 = 100 (Warehouse B demand) XA3 + XB3 + XC3 = 300 (Warehouse C demand) Xij 0 for all i and j.
9-8
Solving the Transportation Example

Factory 1 capacity constraint TO FROM FACTORY 1 WAREHOUSE A $6 WAREHOUSE B $8
WAREHOUSE C $10
FACTORY CAPACITY 150
FACTORY 2
$7
$11
$11
175
FACTORY 3
$4
$5
$12
275
WAREHOUSE REQUIREMENTS
200
100
300
600 Cell representing a source-to-destination (Factory 2 to Warehouse C) shipping assignment that could be made
Table 9.2
Cost of shipping 1 unit from Factory 3 to Warehouse B
Warehouse C demand
Total supply and demand
9-9
Developing an Initial Solution: Northwest Corner Method

From A 1 2 3 Demand 200 150 50 6 7 4 100 100 To B 8 11 5 25 275 300 Supply C 10 11 12 150 175 275 600
Total cost: =(150x6) + (50x7) + (100x11) + (25x11) + (275x12) =?

9-10
Developing an Initial Solution: Minimum Cell Cost Method

From A 1 6 25 To B 8 125 Supply C 10 150
2
3 Demand 200 200
7
4 75 100
11
5
175
11
12
175
275 600
300
Total cost: =(25x8) + (125x10) + (175x11) + (200x4) + (75x5) =?

9-11
Developing an Initial Solution: VAM

Steps: Determine the penalty cost for each row & column. Select the row or column with the highest penalty cost. Allocate as much as possible to the feasible cell with the lowest transportation cost. Repeat step 1, 2, and 3.
9-12
Developing an Initial Solution: VAM

From A 1 6 To B 8 150 Supply C 10 150
2
3 Demand
175
25 200
7
4 100 100
11
5 150 300
11
12
175
275 600
Total cost: =(150x10) + (175x7) + (25x4) + (100x5) + (150x12) =?

9-13
Stepping-Stone Method: Finding a Least Cost Solution

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.
9-14
Testing the Solution for Possible Improvement

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.
9-15
Five Steps to Test Unused Squares with the Stepping-Stone Method

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.
9-16
Five Steps to Test Unused Squares with the Stepping-Stone Method

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.
9-17
Stepping Stone Solution Method

Using the initial solution obtained from Minimum Cell Cost method, solve the transportation problem using Stepping Stone Solution Method.
From 1 2 3 200 Demand 200 A 6 25 7 4 75 100 300 11 175 5 12 275 To B 8 125 11 175 Supply C 10 150
This solution is feasible but we need to check to see if it is optimal. Total cost: 4550
9-18

In this example the empty cells are 1A, 2A, 2B and 3C.
1A
From 1 2 3 Demand
A 6 7
25
To B 8 125 11 175
Supply C 10 11 12 300 150 175 275
200
4 200
+
75
5 100
Improvement index = 6 8 + 5 4 = -1
9-19
Stepping Stone Solution Method 2A

From 1 A 6 To B 8 Supply
25
+
125
C 10
150
2
3 Demand
+
200
7
4 200
11
175
11
12 300
175
275
+
75
5 100
Improvement index = 7 4 + 5 8 + 10 11 = -1
9-20
Stepping Stone Solution Method 2B

From 1 A 6 To B 8 Supply C 10
25
+
125
150
2
3 200 Demand
7
4
+
75
11
5 100
175
11
12 300
175
275
200
Improvement index = 11 8 + 10 11 = +2
9-21
3C
From
1 A 6
+
25
To B 8 11
Supply
125 175
C 10
150
2
3 200 Demand
7
4 200
11
175
275
75
5 100
12 300
Improvement index = 12 10 + 8 5 = +5
9-22

Second iteration:
From
1 25 2 3 175 Demand 200 7 4 100 100 300 11 175 5 12 275 A 6
To B 8
125
Supply
C 10 11 150 175
Total cost: 4525

9-23

In second iteration the empty cells are 1B, 2A, 2B and 3C.
1B
From
1 25 2 3 175 Demand 200 7 4 100 100 300 11 175 5 12 275 A 6
To B 8
125
Supply
C 10 11 150 175
Improvement index = ?
9-24
Stepping Stone Solution Method 2A

From
1 25 A 6
To B 8
125
Supply
C 10 150
2
3 175 Demand
7
4 100 200
11
175 5 100
11
12 300
175
275
9-25
Stepping Stone Solution Method 2B

From 1 25 2 7 11 175 A 6 To B 8 125 11 175 Supply C 10 150
3
175 Demand
4
100 200
5
100
12
300
275
9-26
Stepping Stone Solution Method 3C

From 1 25 2 3 175 Demand 200 7 4 100 100 300 11 175 5 12 275 To B 8 125 11 175 Supply
A 6
C 10
150
9-27

Alternative Solution:
From 1 2 25 A 6 7 To B 8 11 Supply C 150 10 150 11 150 175
3
Demand
175
4
200
100
5
100
12
300
275
Total cost: 4525

9-28
Modified Distribution Method (MODI)
MODI is a modified version of the stepping-stone method in which math equations replace the stepping-stone paths. Steps: 1. Develop an initial solution using one of the three methods. 2. Compute ui and vj for each row & column by applying the formula ui + vj = cij to each cell that has an allocation. 3. Compute the cost change, kij, for each empty cell using kij = cij ui vj. 4. Allocate as much as possible to the empty cell that will result in the greatest net decrease in cost according to the steppingstone path. 5. Repeat steps 2 to 4 until all kij values are positive or zero.
9-29

Using the initial solution obtained from Minimum Cell Cost method, solve the transportation problem using MODI.
From 1 2 3 200 Demand 200 A 6 To B 8 Supply C 10 150 175 275
25
7 4 75 100 11
125
11 175 5 12 300
Total cost: 4550

9-30

VA = 7
From
VB = 8
To B 8 25
VC = 10
Supply C 10 125 11 175 150 175
U1 = 0
U2 = 1
1 2
A 6 7
11
U3 = -3
3
200 Demand
4
75 200
5
100
12
300
275
ui + vj = cij
9-31

Compute the cost change, kij, for each empty cell
using kij = cij ui vj
k1A = c1A u1 vA k2A = c2A u2 vA k2B = c2B u2 vB k3C = c3C u3 vC
= 6 0 7 = -1 = 7 1 7 = -1 = 11 1 8 = +2 = 12 (-3) 10 = +5
9-32

Second iteration:
From
1 25 2 3 175 Demand 200 7 4 100 100 300 11 175 5 12 275 A 6
To B 8
125
Supply
C 10 11 150 175
Total cost: 4525

9-33

Second iteration: VA = ?
From
VB = ?
To B 8
VC = ?
Supply C 10 125 11 175 150 175
U1 = 0
U2 = ?
1 25 2
A 6 7
11
U3 = ?
3
175 Demand
4
100 200
5
100
12
300
275
ui + vj = cij
9-34

Alternative Solution: ?
From 1 2 A 6 7 To B 8 11 Supply C 10 11 150 175
3
Demand
4
200
5
100
12
300
275
9-35

Special cases: 1. The unbalanced transportation model
demand > supply

demand < supply 2. Degeneracy
3. More than one optimal solution

4. Unacceptable or prohibited route
9-36

Example: The unbalanced transportation model 1. Demand > Supply
FROM FACTORIE S 1 2 3 DEMAND TO WAREHOUSES B 8 11 5 100 SUPPLY C 10 11 12 350 150 175 275
A 6 7 4 200
Given is a transportation problem with the following cost, supply and demand. Find the initial solutions using Northwest Corner, Minimum Cell Cost & VAM method.
9-37

2. Demand < Supply
FROM FACTORIE S 1 2 3 DEMAND TO WAREHOUSES B 8 11 5 100 SUPPLY C 10 11 12 300 150 175 375
A 6 7 4 200
Find the initial solutions using Northwest Corner, Minimum Cell Cost & VAM method.
9-38
Degeneracy in Transportation Problems

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.
9-39
Degeneracy in Transportation Problems

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.
9-40
Degeneracy in an Initial Solution

The Martin Shipping Company example illustrates
degeneracy in an initial solution. It has three warehouses which supply three major retail customers. Applying the northwest corner rule the initial solution has only four occupied squares To correct this problem, place a zero in an unused square, typically one adjacent to the last filled cell.
9-41
Degeneracy in an Initial Solution

Initial Solution of a Degenerate Problem
TO FROM WAREHOUSE 1 CUSTOMER 1 100 $8 CUSTOMER 2 CUSTOMER 3 $6 WAREHOUSE SUPPLY 100
0
100
$2
WAREHOUSE 2
$10
$9
20
$9
120
WAREHOUSE 3
$7
$10
80
$7
80
CUSTOMER DEMAND
100
100
100
300
Table 9.13
Possible choices of cells to address the degenerate solution

9-42
Degeneracy During Later Solution Stages

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.
9-43

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
9-44

Bagwell Paint Transportation Table
TO FROM FACTORY A WAREHOUSE 1 70 $8 WAREHOUSE 2 $5 WAREHOUSE 3 $16 FACTORY CAPACITY 70
FACTORY B
50
$15
80
$10
$7
130
FACTORY C
30
$3
$9
50
$10
80
WAREHOUSE REQUIREMENT
150
80
50
280
Table 9.14
9-45

Tracing a Closed Path for the Factory B Warehouse 3 Route
TO FROM FACTORY B WAREHOUSE 1 $15 50 WAREHOUSE 3 $7
$3
+
$10 50
FACTORY C
30
Table 9.15
This would cause two cells to drop to zero. We need to place an artificial zero in one of these
cells to avoid degeneracy.

9-46
More Than One Optimal Solution

It is possible for a transportation problem to have
multiple optimal solutions. This happens when one or more of the improvement indices is 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.

9-47
Maximization Transportation Problems

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 steppingstone path. This new solution is evaluated and the process continues until there are no positive improvement indices.
9-48
Unacceptable Or Prohibited Routes

At times there are transportation problems in
which one of the sources is unable to ship to one or more of the destinations.
The problem is said to have an unacceptable or
prohibited route.
In a minimization problem, such a prohibited
route is assigned a very high cost to prevent this route from ever being used in the optimal solution. In a maximization problem, the very high cost used in minimization problems is given a negative sign, turning it into a very bad profit.
9-49
Copyright
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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Transportation Problem

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Transportation Models

The Transportation Problem

source and the requirements at each destination.

transportation and production costs.

Copyright 2012 Pearson Education

The Transportation Problem

Copyright 2012 Pearson Education

The Transportation Problem

Supply 150 Units

Demand 200 Units

Copyright 2012 Pearson Education

A General LP Model for Transportation Problems

cij = cost of one unit from source i to

si = supply at source i. dj = demand at destination j.

Copyright 2012 Pearson Education

A General LP Model for Transportation Problems

Copyright 2012 Pearson Education

Linear Programming for the Transportation Example

Copyright 2012 Pearson Education

Linear Programming for the Transportation Example

7X2A + 11X2B + 11X2C + 4X3A +5X3B + 12X3C

X3A + X3B + X3C = 275 (Factory 3 supply)

Solving the Transportation Example

FACTORY CAPACITY 150

Cost of shipping 1 unit from Factory 3 to Warehouse B

Total supply and demand

Copyright 2012 Pearson Education

Developing an Initial Solution: Northwest Corner Method

Total cost: =(150x6) + (50x7) + (100x11) + (25x11) + (275x12) =?

Developing an Initial Solution: Minimum Cell Cost Method

Total cost: =(25x8) + (125x10) + (175x11) + (200x4) + (75x5) =?

Developing an Initial Solution: VAM

Copyright 2012 Pearson Education

Developing an Initial Solution: VAM

Total cost: =(150x10) + (175x7) + (25x4) + (100x5) + (150x12) =?

Stepping-Stone Method: Finding a Least Cost Solution

Testing the Solution for Possible Improvement

Copyright 2012 Pearson Education

Five Steps to Test Unused Squares with the Stepping-Stone Method

Copyright 2012 Pearson Education

Five Steps to Test Unused Squares with the Stepping-Stone Method

Stepping Stone Solution Method

Stepping Stone Solution Method

Supply C 10 11 12 300 150 175 275

Stepping Stone Solution Method 2A

Stepping Stone Solution Method 2B

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Stepping Stone Solution Method

Stepping Stone Solution Method

Total cost: 4525

Stepping Stone Solution Method

Stepping Stone Solution Method 2A

Stepping Stone Solution Method 2B

Stepping Stone Solution Method 3C

Copyright 2012 Pearson Education

Stepping Stone Solution Method

Total cost: 4525

Modified Distribution Method (MODI)

Copyright 2012 Pearson Education

Modified Distribution Method (MODI)

Total cost: 4550

Modified Distribution Method (MODI)

Modified Distribution Method (MODI)

using kij = cij ui vj