The transportation problems are one of the types of the

LLP (Linear Programming Problems),

In which objective is to transport various quantities of a
single homogenous commodity, to different destinations in
such a way that the total transportation cost is minimum.
Transportation problems gave direct relevance to decisions
in the area of distribution policy making, where the objective
is minimisation of transportation cost . Here the availability
as well as requirements of the various centres are finite and
constitute the limited resources. It is also assumed that cost
of shipping is linear. Thus these problems could also be solved
by “SIMPLEX METHOD”.
 FEASIBLE SOLUTION (FS) : Non negative values of xij where i =
1,2,……m and j = 1,2 ……n which satisfy the constraints of availability
(supply) and requirement (demand) is called the feasible solution to the
transportation problem.

 BASIC FEASIBLE SOLUTION (BFS) : A feasible solution to a m-

origin, n-destination problem is said to be basic if the number of positive
allocations are m+n-1 i.e. one less than the sum of rows and columns.

 OPTIMAL SOLUTION : A feasible solution is said to be optimal if

it minimizes the total transportation cost. The optimal solution itself may
or may not be a basic solution. This is done through successive
improvements to the initial basic feasible solution until no further
decrease in transportation cost is possible.
 BALANCED TRANSPORTATION PROBLEM : A
transportation problem in which the total supply from all the sources
equals the total demand in all the destinations .

 UNBALANCED TRANSPORTATION PROBLEM : Such

problems which are not balanced are called unbalanced .
MATRIX TERMINOLOGY : In the matrix used in transportation
problem, the squares are called ‘cells’ . These cells form ‘columns’ vertically and
‘row’ horizontally. Unit costs are written in the cells .
WAREHOUSES
1 2 3 4
PLANTS
A 4 2 10 3
B 6 8 7 5
DEMAND 15 7 8 12

The cell located at intersection of row B and column 4 is the one in which the
unit cost 5 is written as (B,4).

 DEGENERATE BASIC FEASIBLE SOLUTION (DBFS) : If the

number of allocation in a basic feasible solutions are less than (m+n-1), it is
called degenerate basic feasible solution (DBFS).
1. AVAIABLITY OF THE QUANTITY : Quantity available for
distribution at different sources or depots is equal to total
requirement of different consumption centres.

2. TRANSPORTATION OF ITEMS : Items can be conveniently

transported from every production centre to every consumption
centre.
3. COST PER UNIT : The per unit transportation cost of
items from one production centre to another consumption
centre is certain.

4. INDEPENDENT COST : The per unit cost of

transportation is independent of the quantity despatched

5. OBJECTIVE : The objective of such an arrangement is to

minimise the total cost of transportation for the organisation
as a whole
There are 2 steps to find the optimal
solution of the transportation problems :

 find an initial basic feasible solution.

 obtain an optimal solution by making

successive improvements to initial basic
feasible solution until no further decrease
in the transportation cost is possible.
Following are the important methods of developing an initial feasible solution :

(a) North West Corner Methods (NWCM).

(b) Lowest Cost Entry Method (LCEM or Matrix Minima Method).

(c) Vogel’s Approximation Method (VAM).

This is the most systematic and easiest method for
obtaining initial feasible solution :

Steps involved in this method are stated as :

Step 1. Construct an empty m*n matrix, completed with

rows and columns.

Step 2. Indicate the rows totals and columns totals at the

end.

Step 3. starting with (1,1) cells at the North-West Corner of

the matrix, allocate maximum possible quantity keeping in
view that allocation can neither be more than the quantity
required by the respective warehouses nor more than the
quantity available at each supply centre.
Step 4. Adjust the supply and demand numbers in the
respective rows and columns allocations.

Step 5. If the supply for the first row is exhausted then

move down to the first cell in the second row and first
column and go to step 4.

Step 6. If the demand for the first column is satisfied, then

move to the next cell in the second column and first row
and go to step 4.

Step 7. If for any cell, supply equals demand then the next
allocation can be made in cell either in the next row or
column.

Step 8. Continue the procedure until the total available

quantity is fully allocated to the cells as required.
Ques : find the initial basic feasible solution by at least three different methods
for the following transportation problem :

From\To D1 D2 D3 D4 Available
F1 10 7 3 6 3

F2 1 6 7 3 5

F3 7 4 5 6 7

Demand 3 2 6 4 15\15
Solution : (a) Initial basic feasible solution by NWCM :

From\To D1 D2 D3 D4 Available

10 7 3 6
F1 3 3

1 6 7 3
F2 2 3 5

7 4 5 6
F3 3 4 7

Demand 3 2 6 4 15\15
TOTAL COST IS :

• F1-D1 = 10*3 =30

• F2-D2 = 6*2 =12

• F2-D3 = 7*3 =21

• F3-D3 = 5*3 =15

• F3-D4 = 6*4 =24

TOTAL COST Rs. 102

This method takes into consideration the lowest cost and
therefore takes less time to solve the problem; various steps
of this method can be summarized as under:

Step1. select the cell with the lowest transportation cost

among al the rows or columns of the transportation table. If
the minimum cost is not unique then select arbitrarily any
cell with the lowest cost.

Step2. Allocate as many units as possible to the cell

determined in step1 and eliminate that row in which either
capacity or requirement is exhausted.
Step 3. Adjust the capacity and requirement for the next
allocations.

Step 4. Repeat steps 1 to 3 for the reduced table until the

entire capacities are exhausted to fill the requirement at
different destinations.
From/To D1 D2 D3 D4 Available

10 7 3 6
3
F1 3

1 6 7 3
5
F2 3 2

7 4 5 6
7
2 3 2
F3

Demand 3 2 6 4 15/15
TOTAL COST IS :

F1-D3 = 3*3 = 9

F2-D1 = 1*3 = 3

F2-D4 = 3*2 = 6

F3-D2 = 4*2 = 8

F3-D3 = 5*3 = 15

F3-D4 = 6*2= 12

TOTAL COST Rs. 53

This method is preferred over the other two methods because
the initial basic feasible solution obtained with VAM is either
optimal or very close to the optimal solution. Therefore, the
amount of time required to calculate the optimum solution is
reduced. In Vogel’s approximation method the basis of
allocation is unit cost penalty i.e., that column or row which
has the highest unit cost penalty (difference between the lowest
and the next higher cost) is selected first for allocation and the
subsequent allocation in cells are also done keeping in view the
highest unit cost penalty.
The steps are as follows :

Step 1. For each row of the table identify the lowest and the next
lowest cost cell. Find their differences and place it to the right of that
row. In case two cells contains the same least cost then the
difference shall be zero.

Step 2. Similarly find the differences of each column and place it

below each column.
These differences found in steps (1) and (2) are also called penalties.

Step 3. Looking at all the penalties. Identify highest of them and the
row or column relative to that penalty. Allocate the maximum units
to the least cost cell in the selected row or column. Ties should be
broken in this order
Maximum difference Least Cost Cell.
Tie
Maximum difference Least Cost Cell.
Tie
Maximum Units allocation Arbitrary
Step 4. Adjust the supply and demand and cross the satisfied row
or column.

Step 5. Recompute the column and row difference ignoring deleted

rows/columns and go to step number (3) Repeat the procedure
until all the column and rows totals are satisfied.
After computation of an initial basic feasible solution, we can
proceed to know, whether the solution so obtained is optimum or
not.

Solution so obtained may be optimal, so it becomes essential for

us to test for optimization. For this purpose we first define non-
degenerate basic feasible solution.

Basic feasible solution of an (m*n) transportation problem is said

to be non-degenerate if it has following two properties :
(a) Initial basic feasible solution must contain exactly m+n-1
number of individual allocations.

(b) These allocations must be in independent positions.

Independent position of a set of allocations means that it is
always impossible to form any closed loop through these
allocations. See figures given below :
For this purpose two methods are followed.

(A) Stepping Stone Method.

(B) Modified Distribution Method (MODI)

These methods are followed to discuss the optimality of an initial

basic feasible solution.

(A) The stepping stone method. The stepping stones method is an

interactive technique from moving an initial feasible solution.
In order to apply the Stepping Stone Method, to
transportation problem, one rule about the number of
shipping routes being used must first be observed. In this
rule, the number of occupied routes (or square) must always
be equal to one less than the sum of the number of rows plus
the number of columns.

(B) Testing the solution for possible improvement. How does the
stepping stone method work? Its approach is to evaluate the
cost effectiveness of shipping goods via transportation routes
not currently in the solution.
(A) Stepping Stone Method

The stepping stone method for testing the optimality can be

summarized in the following steps :
Step 1. Prepare a transportation table with a given unit cost of
transportation along with the Rim Requirements.
Step 2. Determine an initial basic feasible solution using any
method (preferably VAM).
Step 3. Evaluate all unoccupied cell for the effect of transferring
one unit from an occupied cell. This transfer is made by
forming a closed path (loop) that retains the supply and
demand condition of the problem.

The evaluation is conducted as follows.

(a) Select an unused square to be evaluated.

(b) Beginning with the selected unused square trace a closed path
(or loop) through atleast three occupied cell. (it is called home
square). The direction of the movement taken is immaterial
because the result will be same in either case. In the closed
path formulation of only right angle turn is allowed, and
therefore skip all other cells which are not at the turning
points.
(c) At each corner of the closed path assign plus (+) and minus (-)
sign alternatively beginning with plus sign for the unoccupied
square (water square) to be evaluated. The +ve and –ve signs can be
assigned either in a clockwise or counter clockwise direction.

(d) Compute the net change in cost along the closed path by adding
together the unit transportation costs associated with each of the
cell traced in the closed path. Comparing the addition to cost with
decreases, will be the improvement index.

(e) Repeat steps 3 (a) to 3 (d) until net change in cost has been
calculated for all unoccupied cells.

Step 4. Check the sign of each of the net change in the unit
transportation costs. If all net changes are plus (+) or zero, then we
have obtained an optimal solution, otherwise go to step 5.
Step 5. Select the unoccupied cell with most negative net change
among all unoccupied cells. If two minus values are equal, select
that one which will result in moving as many units as possible
into the selected unoccupied cell with the minimum cost.

Step 6. Assign as many units as possible to unoccupied cell

satisfying rim conditions. The maximum number of units to be
assigned are equal to the smaller circled number ignoring sign
among the occupied cells with minus value in the closed path.

Step 7. Go to step 3 and repeat the procedure until all

unoccupied cells are evaluated and net change is positive or zero
values.
The MODI (modified distribution) method allow us to
compute improvement indices quickly for each unbiased
square without drawing all of the closed paths (loops).
Because of this it can often provide considerable time
savings over the stepping stone method for solving
transportation problems.

MODI provide a new means of finding the unused route

with the largest negative improvement index. Once the
largest index is identified, we are required to trace only one
closed path, just as with the stepping stone approach, this
path helps to determine the maximum number of units
that can be shipped via the best unused route.
The following steps are followed to determine the optimality.

Step 1. from the given data construct a transportation table with

the given cost of transportation and rim conditions.

Step 2. Determine in initial basic feasible solution using a suitable

method (i.e. NWCM, LCEM or VAM).

Step 3. For the current basic feasible solution with m+n-1 occupied
cells, calculate index numbers (dual variables) Ri = (i = 1,2,....m)
and Kj = (j=1,21.....,n) for rows and columns, respectively.
For calculating values of Ri and Kj, the following relationship
(formula) for occupied cells is used,
cij = Ri + kj for all i,j

Step 4. For occupied cells, the opportunity cost by using the

formula.
dij = cij – Ri + Kj for all i,j

Step 5. Now the opportunity cost of an unoccupied call is

determined by using the formula :
Opportunity cost = Actual cost- Implied cost
dij = cij – (Ri + kj)
Step 6. Examine unoccupied cells evaluation for Dij
(a) If dij > 0, then the cost of transportation will increase, i.e., and
optimal solution has been arrived at.
(b) If dij = 0, then the cost of transportation will remain unchanged.
But there exists an alternative solution.
(c) If dij < 0, then an improved solution can be obtained by
introducing cell (i,j) in the basis and go to step 7. (i.e. Next step)

Step 7. Select an unoccupied cell (i.e. Water square) with largest

negative opportunity cost among all unoccupied cells.

Step 8. Construct a closed path for the unoccupied cell determined in

step 7 and assign plus (+) and minus (-) sign alternatively
beginning with plus sign for the selected unoccupied cell in
clockwise or other direction.

Step 9. Assign as many units as possible to the unoccupied cell

satisfying rim conditions. The smallest allocation in a cell with
negative sign on the closed path indicated the number of units that
can be transported to the unoccupied cells. This quantity is added
to all the unoccupied cells on the path marked with plus sign and
subtracted from the those occupied cells on the path marked with
minus signs.
 Step 10. Go to step 4 and repeat procedure until all dij > 0, i.e., an
optimal solution is reached. Calculate the associated total
transportation cost.
Ques : A product is manufactured by four factories A,B,C and D. The unit
production cost in them are Rs.2, Rs.3,Rs.1 and Rs.5 respectively. Their
production capacities are 50, 70,30 and 50 units respectively. These factories
supply the product to four stories, demands of which are 25,35,105 and 20
units respectively. Unit transportation cost in rupees from each factory to each
store is given in the table below :
STORES
1 2 3 4
A 2 4 6 11

B 10 8 7 5
FACTORIES
C 13 3 9 12

D 4 6 8 3

Determine the transportation plan to minimize the total

production – cum-transportation cost.
 1 2 3 4 5 CAP. UP1 UP2 UP3 UP4 UP5 UP6 UP7
A 2 4 6 11 0 50 2 2 2 2 2 6 6

B 10 8 7 5 0 70 5 2 2 2 1 7 7

C 13 3 9 12 0 30 3 6 6 - - - -

D 4 6 8 3 0 50 3 1 1 3 2 8 -

DEM.25 35 105 20 15 200

UP1 2 1 1 2 0

UP2 2 1 1 2 -

UP3 2 2 1 2 -
UP4 - 2 1 2 -

UP5 - 2 2 - -

UP6 - - 1 - -

UP7 - - 1 - -
Since Rim Requirement = m+n-1 = 4+5-1 = 8
Rim Requirement = number of stone squares ; 8 = 8
The above solution is non-degenerate so minimum transportation
cost we get :

A-1 = 2*25 = 50

A-2 = 4*5 = 20

A-3 = 6*20 = 120

B-3 = 7*55 = 385

B-3 = 0*15 = 0

C-2 = 3*30 = 90

D-3 = 8*30 = 240

D-4 = 3*20 = 60
TOTAL COST Rs.965
Now, we proceed to test its optimality by MODI Method.
Calculation of opportunity cost of water squares is as below :

Unused Square Cij – Ri - Kj Improvement index

A- 4 11-0-1 10

A- 5 0-0+1 1

B-1 10-1-2 7

B-2 8-1-4 3

B-4 5-1-1 3

C-1 13+1-2 12

C-3 9+1-6 4

C-4 12+1-1 12

C-5 0+1+1 2

D-1 4-2-2 0

D-2 6-2-4 0

D- 5 0-2+1 -1
It may be noted that total number of stone squares must be equal
to the m+n-1 i.e. rim requirement . If this condition is not satisfied
the solution is degenerate.
Such situation occurs in the following two cases :

(a) There may be excessive number of stone squares in a solution

than the rim requirement that is m+n-1. This type of degeneracy
arises only in developing the initial solution and is caused by an
improper assignment or an error in formulating the problem. In
such cases there is a need to modify the initial solution so as to
satisfy the rule of m+n-1 (rim requirements).

(b) The second situation occurs when there may be insufficient

number of stone squares in a solution. Degeneracy of this type may
occur either in the initial solution or in subsequent table .
Stage 1 : Degeneracy occur at the initial solution

This particular case of degeneracy arises when both a column

requirement and row requirement are satisfied simultaneously.
We introduce Greek letter epsilon (e) in a water square with the
lowest transportation cost and by this process the number of stone
squares becomes equal to the rim requirements and we can
proceed to solve the solution in an ordinary way. The value of
Epsilon (e) is assumed to be something greater than 0 but which
does not affect our mathematical calculation in anyway. Once (e) is
introduced into the solution, it will remain there until degeneracy
is removed or a final solution is arrived at, whichever occurs first.
The use of (e) is illustrated in the following example. :

Ques : The sunrise transport company ships truck loads of grain

from silos to four mills. The supply (in truck loads) and the
demand (also in truck loads) together with the unit transportation
cost per truckload on the different routes are summarized in the
following table-unit transportation costs. Cij are in the hundreds
of dollars . Determine the minimum cost shipping schedule
between the silos and mills (By using Vogel's approximation
Method for I.B.F.S. is obtained as below ).
 MILLS

SILOS 1 2 3 4 5

10 2 20 11

1 15 15

12 7 9 20

2 15 10 25

4 14 16 18

3 5 5 10

Require-
ment
5 15 15 15 50\50
Solution : Since Rim Requirement = m+n-1 = 3+4-1 = 6
But stone square = 5
This is a case of degeneracy because Rim Requirement Stone
Squares
We have introduced and epsilon in the least cost independent cell
 MILLS

SILOS 1 2 3 4 SUPPLY

10 2 20 11

1 15 15

12 7 9 20

2 e 15 10 25

4 14 16 18

3 5 5 10

Require-
Ment 5 15 15 15 50\50
We calculated the values of unused square by using stepping
stone method

1 – 1 = 10-4+18-20+7-2 = 9

1 – 3 = 20-9+7-2 = 16

1 – 4 = 11-20+7-2 = -4

2 – 1 = 12-4+18-20+6 = 12

3 – 2 = 14-18+20-7 =9

3 – 3 = 16-18+20-9 =9

We make a closed loop path from the highest negative value i.e. -4
and proceed further. Since the value of cell 1 – 4 is least –ve and
the improved solution is shown below :
 MILLS

SILOS 1 2 3 4 SUPPLY

10 2 20 11

1 5 10 15

12 7 9 20

2 25
10 15

4 14 16 18

3 5 5 10

REQUIR 5 15 15 15 50\50
-EMENT
Value of unused square by using stepping stone method.

1 – 1 = 10-4+8-11 = 13

1 – 3 = 20-9+7-2 = 16

2 – 1 = 12-7+2-11+18-4 = 10

2 – 4 = 20-7+2-11 =4

3 – 2 = 14-2+11-18 =5

3 – 3 = 16-9+7-2+11-18 = 5

Since the values of all opportunity cost of all squares cells is +ve.
So we get the optimum solution and rim requirement = stone
squares i.e.6 = 6

Total transportation cost = 2*5+7*10+9*15+11*10+18*5+4*5

= 10+70+135+110+90+20
= Rs. 435