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Transshipment Problem
The transportation problem is actually a special case of
the transshipment problem. If items are being transported
from the source through an intermediate point (called a
transshipment point) before reaching a final destination,
then the problem is called a transshipment problem. For
example, a company might be manufacturing a product at
several factories to be shipped to a set of regional
distribution centers. From these centers the items are
shipped to retail outlets that are the final destinations. An
example follows.
Example 1

Frosty Machines manufactures snow-blowers in factories located in

Toronto and Detroit. These are shipped to regional distribution
centers in Chicago and Buffalo, where they are delivered to the
supply houses in New York, Phila, and Louis. Figure 1 illustrates
the basic network representation of this situation. The shipping
costs vary, as shown in the following table. Forecasted demands for
New York, Phila, and Louis are also seen in this table, as are the
available supplies of snow-blowers at the two factories. Notice that
snow-blowers may not be shipped directly from Toronto or Detroit
to any of the final destinations. This is why Chicago and Buffalo are
listed not only as destinations but also as sources.
To Chicago Buffalo N.York Phila Louis Supply

Toronto $4 $7 - - - 800

Detroit $5 $7 - - - 700

Chicago -- -- $6 $4 $5 -

Buffalo - - $2 $3 $4 -

Demand - - 450 350 300 -

Source Point N. York
Toronto o

Detroit Buffalo


Network representation of frosty machines problem

from these transshipment points must have
arrived from either Toronto or Detroit.
Therefore, Chicago and Buffalo will each
have a constraint indicating this. The verbal
state-ment of this problem would be as
Minimize cost, subject to:

1. the number of units shipped from Toronto is not more than 800
2. the number of units shipped from Detroit is not more than 700
3.the number of units shipped to New York is 450
4.the number of units shipped to Philadelphia is 350
5. the number of units shipped to St. Louis is 300
6.the number of units shipped out of Chicago is equal to the number
of units shipped into Chicago
7.the number of units shipped out of Buffalo is equal to the number
of units shipped into Buffalo

The decision variables should represent the number of units shipped

from each source to .each transshipment point and the number of
units shipped from each transshipment point to each final
destination, as these are the decisions management must make. The
decision variables are
T1 = the number of units shipped from Toronto to Chicago

T2 = the number of units shipped from Toronto to Buffalo

D1 = the number of units shipped from Detroit to Chicago

D2 = the number of units shipped from Detroit to Buffalo

C1 = the number of units shipped from Chicago to New York

C2 = the number of units shipped from Chicago to Philadelphia

C3 = the number of units shipped from Chicago to St. Louis

B1 = the number of units shipped from Buffalo to New York

B2 = the number of units shipped from Buffalo to Philadelphia

B3 = the number of units shipped from Buffalo to St. Louis

The Linear Program is:
Minimize cost =
4T1+7T2+5D1+7D2 +6C1+4C2 + 5C3+2B1+3B2+4B3

Subject To:

T1 +T2<= 800 Supply from Toronto

D1+D2<= 700 Supply from Detroit
C1 +B1 = 450 Demand at New-york
C2+B2 = 350 Demand at Phila
C3+B3 = 300 Demand at Louis
T1+D1 = C1+C2+C3 Shipping through Chicago
T2+D2 = B1+B2+B3 Shipping through Buffalo
Solving this with QM for Windows yields the output
in Program 8.7. From this we see that we should ship
650 units from Toronto to Chicago, 150 units from
Toronto to Buffalo, and 300 units from Detroit to
Buffalo. A total of 350 units will be shipped from
Chicago to Philadelphia, 300 from Chicago to St.
Louis, and 450 from Buffalo to New York. The total
cost will be $9,550.
Consider a transportation problem where the origins
are plants and destinations are depots. The unit
transportation costs, capacity at the plants and the
requirements at the depots are indicated below :
X Y Z Cap.
A 1 3 15 150
B 3 5 25 300
Req. 150 150 150 450

Table 1
When each plant is also considered a destination and each
depot is also considered an origin, there are altogether five
origins and five destinations. Some additional cost data are also
necessary. There are presented in the following Tables.
Unit transportation cost from plant to plant
To A B
From Plant
A 0 65 Table 2
B 1 0
Unit transportation cost from Depot to Depot

To X Y Z
From Depot
X 0 23 1
Y 1 0 3 Table 3
Z 65 3 0
Unit transportation cost from Depot to Plant

Plant A B

X 3 15
Y 25 3
Z 45 55
Table 4
From Table 1, Table 2, Table 3 and Table 4 we obtain the
transportation formulation of the transshipment problem
Table 5: Transshipment Table
A B X Y Z Cap.
A 0 65 1 3 15 150+450 = 600

B 1 0 3 5 25 300+450 =750
X 3 15 0 23 1 450
Y 25 3 1 0 3 450
Z 45 55 65 3 0 450
Req. 450 450 150+ 150+ 150+
450= 450= 450= 2700
600 600 600
A buffer stock of 450 which is the total capacity and total requirement in the
original transportation problem is added to each row and column of the
transshipment problem. The resulting transportation problem has m + n = 5
origins and m + n = 5 destinations. On solving the transportation problem
presented in Table 5

we obtain x11 = 150; x13 = 300 ; x14 = 150; x21 = 300

x22 = 450; x33 = 300; x35 = 150; X44 = 450 x55 = 450.

The description of the transshipment problem is given below :

1)Transport x21 = 300 units from plant B to plant A. This increase the availability
at plant A to 450 units including the 150 units originally available from A.

2)From plant A transport xI3 = 300 to depot X and X14 = 150 to depot Y.

3) From 300 units available at depot X transport x35 = 150 units to depot Z.
The total transshipment cost is:
1 x 300 + 3 x 150 + 1 x 300 + 1 x 150 = 1200

If, however, the consignments are transported from plants A, B to

depots X, Y, Z only according to the transportation Table 1, the
minimum transportation cost schedule is x13 = 150; x21 = 150; x22
= 150 with a minimum cost of 3450. Thus transshipment reduces
the cost of cargo movement in this case.
Example 3

Safety product Ltd. is a manufacturer of safety pins in northern

India. Recently it has received an order to supply the specified
quantities of safety pin in Chennai for four consecutive months
starting at the end of the current month. The following details
are available:
Month Order Maximum Cost of
received (for production Production
no. of lots) Capacity per lot.
Jan 2009 20 40 14

Feb. 2009 30 50 16

March 2009 50 30 15

April 2009 40 50 17
Assuming the storage cost to be Rs. 1 per lot per month,
advise M/s safety products Ltd. as to the optimal production
schedule such that the cost is minimized & there are
no lost sales.

Try solving it yourself and then tally your answer with the
solution given below.