C h a p t e r 9

Transportation Problem
“We want these assets to be productive. We buy them. We own them. To say we care only
about the short term is wrong. What I care about is seeing these assets in the best hands.”
– Carl Icahn

PREVIEW
The structure of transportation problem involves a large number of shipping routes from several supply
centres to several demand centres. The objective is to determine the number of units of an item (commodity
or product) that should be shipped from an origin to a destination in order to satisfy the required quantity
of goods or services at each destination centre.

LEARNING OBJECTIVES

After studying this chapter, you should be able to

z recognize and formulate a transportation problem involving a large number of shipping routes.
z drive initial feasible solution using several methods.
z drive optimal solution by using Modified Distribution Method.
z handle the problem of degenerate and unbalanced transportation problem.
z examine multiple optimal solutions, and prohibited routes in the transportation problem.
z construct the initial transportation table for a trans-shipment problem.
z solve a profit maximization transportation problem using suitable changes in the transportation algorithm.

CHAPTER OUTLINE
9.1 Introduction 9.6 Variations in Transportation Problem
9.2 Mathematical Model of Transportation Problem 9.7 Maximization Transportation Problem
9.3 The Transportation Algorithm 9.8 Trans-shipment Problem
9.4 Methods of Finding Initial Solution • Conceptual Questions C
• Conceptual Questions A • Self Practice Problems C
• Self Practice Problems A • Hints and Answers
• Hints and Answers ‰ Chapter Summary
9.5 Test for Optimality ‰ Chapter Concepts Quiz
• Conceptual Questions B ‰ Case Study
• Self Practice Problems B ‰ Appendix: Theorem and Results
• Hints and Answers
 Transportation Problem 257

9.1 INTRODUCTION
One important application of linear programming is in the area of physical distribution (transportation) of
goods and services from several supply centres to several demand centres. A transportation problem when
expressed in terms of an LP model can also be solved by the simplex method. However a transportation
problem involves a large number of variables and constraints, solving it using simplex methods takes a
long time. Two transportation algorithms, namely Stepping Stone Method and the MODI (modified
distribution) Method have been developed for solving a transportation problem.
The structure of transportation problem involves a large number of shipping routes from several supply
centres to several demand centres. Thus, objective is to determine shipping routes between supply centres
and demand centres in order to satisfy the required quantity of goods or services at each destination centre,
with available quantity of goods or services at each supply centre at the minimum transportation cost and/
or time.
The transportation algorithms help to minimize the total cost of transporting a homogeneous The study of
commodity (product) from supply centres to demand centres. However, it can also be applied to the transportation
maximization of total value or utility. problem helps to
There are various types of transportation models and the simplest of them was first presented by identify optimal
transportation routes
F L Hitchcock (1941). It was further developed by T C Koopmans (1949) and G B Dantzig (1951). Several along with units of
extensions of transportation models and methods have been subsequently developed. commodity to be
shipped in order to
minimize total
9.2 MATHEMATICAL MODEL OF TRANSPORTATION PROBLEM transportation cost.

Let us consider Example 9.1 to illustrate the mathematical model formulation of transportation problem of
transporting a single commodity from three sources of supply to four demand destinations. The sources
of supply are production facilities, warehouses, or supply centres, each having certain amount of
commodity to supply. The destinations are consumption facilities, warehouses or demand centres each
having certain amount of requirement (or demand) of the commodity.

Example 9.1 A company has three production facilities S1, S2 and S3 with production capacity of 7,
9 and 18 units (in 100s) per week of a product, respectively. These units are to be shipped to four
warehouses D1, D2, D3 and D4 with requirement of 5, 6, 7 and 14 units (in 100s) per week, respectively.
The transportation costs (in rupees) per unit between factories to warehouses are given in the table below:

D1 D2 D3 D4 Supply
(Availability)

S1 19 30 50 10 7

S2 70 30 40 60 9

S3 40 8 70 20 18

Demand 5 8 7 14 34
(Requirement)

Formulate this transportation problem as an LP model to minimize the total transportation cost.
Model formulation Let xij = number of units of the product to be transported from a production facility
i (i = 1, 2, 3) to a warehouse j ( j = 1, 2, 3, 4)
The transportation problem is stated as an LP model as follows:
Minimize (total transportation cost) Z = 19x11 + 30x12 + 50x13 + 10x14 + 70x21 + 30x22 + 40x23
+ 60x24 + 40x31 + 8x32 + 70x33 + 20x34
subject to the constraints
x11 + x12 + x13 + x14 = 17 
x21 + x22 + x23 + x24 = 19  (Supply)
x31 + x32 + x33 + x34 = 18 
258 Operations Research: Theory and Applications

x11 + x21 + x31 = 15

x12 + x22 + x32 = 18

 (Demand)
x13 + x23 + x33 = 17
x14 + x24 + x34 = 14
and xij ≥ 0 for i = 1, 2, 3 and j = 1, 2, 3, and 4.
In the above LP model, there are m × n = 3 × 4 = 12 decision variables, xij and m + n = 7 constraints,
where m are the number of rows and n are the number of columns in a general transportation table.

9.2.1 General Mathematical Model of Transportation Problem

Let there be m sources of supply, S1, S2, . . ., Sm having ai (i = 1, 2, . . ., m) units of supply (or
capacity), respectively to be transported to n destinations, D1 , D2 , . . ., D n with b j ( j = 1, 2, . . ., n)
units of demand (or requirement), respectively. Let cij be the cost of shipping one unit of the
commodity from source i to destination j. If x ij represents number of units shipped from source i to
destination j, the problem is to determine the transportation schedule so as to minimize the total
transportation cost while satisfying the supply and demand conditions. Mathematically, the
transportation problem, in general, may be stated as follows:
m n
Minimize (total cost) Z = Σ Σ cij xij (1)
i =1 j =1

subject to the constraints

n
Σ xij = ai , i = 1, 2, . . ., m (supply constraints) (2)
j =1
m
Σ xij = b j , j = 1, 2, . . ., n (demand constraints) (3)
i =1

and xij ≥ 0 for all i and j. (4)

For easy presentation and solution, a transportation problem data is generally presented as shown
in Table 9.1.
Transportation
table is a Existence of feasible solution A necessary and sufficient condition for a feasible solution to the
convenient way to transportation problems is:
summarize data.
Total supply = Total demand
m n
Σ ai = Σ b j (also called rim conditions)
i =1 j =1
For proof, see Appendix at the end of this chapter.

To D1 D2 ... Dn Supply
From ai
c11 c12 ... c1n
S1 x11 x12 x1n a1

c21 c22 ... c2n

S2 x21 x22 x2n a2

.. .. .. .. ..
. . . . .
cm1 cm2 ... cmn
Sm xm1 xm2 xmn am
Table 9.1
General
m n
Transportation Demand b1 b2 ... bn Σ ai = Σ b j
Table. bj i =1 j =1
 Transportation Problem 259

In this problem, there are (m + n) constraints, one for each source of supply, and distinction and
m × n variables. Since all (m + n) constraints are equations, therefore, one of these equations is extra
(redundant). The extra constraint (equation) can be derived from the other constraints (equations), without
affecting the feasible solution. It follows that any feasible solution for a transportation problem must have
exactly (m + n – 1) non-negative basic variables (or allocations) xij satisfying the rim conditions.
Remarks 1. When the total supply is equal to the total demand, the problem is called a balanced
transportation problem, otherwise it is called an unbalanced transportation problem. The unbalanced
transportation problem can be made balanced by adding a dummy supply centre (row) or a dummy
demand centre (column) as the need arises.
2. When the number of positive allocations (values of decision variables) at any stage of the feasible When total demand
solution is less than the required number (rows + columns – 1), i.e. number of independent constraint equals total supply,
equations, the solution is said to be degenerate, otherwise non-degenerate. For proof, see Appendix the transportation
at the end of this chapter. problem is said to
be balanced.
3. Cells in the transportation table having positive allocation, i.e., xij > 0 are called occupied cells,
otherwise are known as non-occupied (or empty) cells.

9.3 THE TRANSPORTATION ALGORITHM

The algorithm for solving a transportation problem may be summarized into the following steps:
Step 1: Formulate the problem and arrange the data in the matrix form The formulation
of the transportation problem is similar to the LP problem formulation. In transportation problem, the
objective function is the total transportation cost and the constraints are the amount of supply and demand
available at each source and destination, respectively.
Step 2: Obtain an initial basic feasible solution In this chapter, following three different methods
are discussed to obtain an initial solution:
• North-West Corner Method,
• Least Cost Method, and
• Vogel’s Approximation (or Penalty) Method.
The initial solution obtained by any of the three methods must satisfy the following conditions:
(i) The solution must be feasible, i.e. it must satisfy all the supply and demand constraints (also called
rim conditions).
(ii) The number of positive allocations must be equal to m + n – 1, where m is the number of rows
and n is the number of columns.
Any solution that satisfies the above conditions is called non-degenerate basic feasible solution,
otherwise, degenerate solution.
Step 3: Test the initial solution for optimality In this chapter, the Modified Distribution (MODI)
method is discussed to test the optimality of the solution obtained in Step 2. If the current solution is
optimal, then stop. Otherwise, determine a new improved solution.
Step 4: Updating the solution Repeat Step 3 until an optimal solution is reached.

9.4 METHODS OF FINDING INITIAL SOLUTION

There are several methods available to obtain an initial basic feasible solution. In this chapter, we shall
discuss only following three methods:

9.4.1 North-West Corner Method (NWCM)

This method does not take into account the cost of transportation on any route of transportation. The
method can be summarized as follows:
Step 1: Start with the cell at the upper left (north-west) corner of the transportation table (or matrix) and
allocate commodity equal to the minimum of the rim values for the first row and first column, i.e. min (a1, b1).
260 Operations Research: Theory and Applications

Step 2: (a) If allocation made in Step 1 is equal to the supply available at first source (a1, in first row),
then move vertically down to the cell (2, 1), i.e., second row and first column. Apply Step 1 again, for next
allocation.
(b) If allocation made in Step 1 is equal to the demand of the first destination (b1 in first column),
then move horizontally to the cell (1, 2), i.e., first row and second column. Apply Step 1 again for next
allocation.
(c) If a1 = b1, allocate x11 = a1 or b1 and move diagonally to the cell (2, 2).
Step 3: Continue the procedure step by step till an allocation is made in the south-east corner cell of
the transportation table.
Remark If during the process of making allocation at a particular cell, the supply equals demand, then
the next allocation of magnitude zero can be made in a cell either in the next row or column. This condition
is known as degeneracy.
Example 9.2 Use North-West Corner Method (NWCM) to find an initial basic feasible solution to the
transportation problem using data of Example 9.1
Solution The cell (S1, D1) is the north-west corner cell in the given transportation table. The rim values
for row S1 and column D1 are compared. The smaller of the two, i.e. 5, is assigned as the first allocation;
otherwise it will violate the feasibility condition. This means that 5 units of a commodity are to be
transported from source S1 to destination D1. However, this allocation leaves a supply of 7 – 5 = 2 units
of commodity at S1.
Move horizontally and allocate as much as possible to cell (S1, D2). The rim value for row S1 is 2 and
for column D2 is 8. The smaller of the two, i.e. 2, is placed in the cell. Proceeding to row S2, since the demand
of D1 is fullfilled. The unfulfilled demand of D2 is now 8 – 2 = 6 units. This can be fulfilled by S2 with
capacity of 9 units. So 6 units are allocated to cell (S2, D2). The demand of D2 is now satisfied and a balance
of 9 – 6 = 3 units remains with S2.

D1 D2 D3 D4 Supply

19 30 50 10
S1 5 2 7

70 30 40 60
S2 6 3 9

40 8 70 20
S3 4 14 18
Table 9.2
Initial Solution
using NWCM Demand 5 8 7 14 34

Continue to move horizontally and vertically in the same manner to make desired allocations. Once the
procedure is over, count the number of positive allocations. These allocations (occupied cells) should be
equal to m + n – l = 3 + 4 – l = 6. If yes, then solution is non-degenerate feasible solution. Otherwise
degenerate solution.
The total transportation cost of the initial solution is obtained by multiplying the quantity xij in the
occupied cells with the corresponding unit cost cij and adding all the values together. Thus, the total
transportation cost of this solution is
Total cost = 5 × 19 + 2 × 30 + 6 × 30 + 3 × 40 + 4 × 70 + 14 × 20 = Rs 1,015

9.4.2 Least Cost Method (LCM)

Since the main objective is to minimize the total transportation cost, transport as much as
possible through those routes (cells) where the unit transportation cost is lowest. This method takes into
account the minimum unit cost of transportation for obtaining the initial solution and can be summarized
as follows:
 Transportation Problem 261

Step 1: Select the cell with the lowest unit cost in the entire transportation table and allocate as much
as possible to this cell. Then eliminate (line out) that row or column in which either the supply or demand
is fulfilled. If a row and a column are both satisfied simultaneously, then crossed off either a row or a column.
In case the smallest unit cost cell is not unique, then select the cell where the maximum allocation can
be made.
Step 2: After adjusting the supply and demand for all uncrossed rows and columns repeat the procedure
to select a cell with the next lowest unit cost among the remaining rows and columns of the transportation
table and allocate as much as possible to this cell. Then crossed off that row and column in which either
supply or demand is exhausted.
Step 3: Repeat the procedure until the available supply at various sources and demand at various
destinations is satisfied. The solution so obtained need not be non-degenerate.
Example 9.3 Use Least Cost Method (LCM) to find initial basic feasible solution to the transportation
problem using data of Example 9.1.
Solution The cell with lowest unit cost (i.e., 8) is (S3, D2). The maximum units which can be allocated
to this cell is 8. This meets the complete demand of D2 and leave l0 units with S3, as shown in Table 9.3.
In the reduced table without column D2, the next smallest unit transportation cost, is 10 in cell
(S1, D4). The maximum which can be allocated to this cell is 7. This exhausts the capacity of S1 and
leaves 7 units with D4 as unsatisfied demand. This is shown in Table 9.3.

D1 D2 D3 D4 Supply

19 30 50 10
S1 7
7
70 30 40 60
S2 9

40 8 70 20
S3 18
8

Demand 5 8 7 14 34 Table 9.3

In Table 9.3, the next smallest cost is 20 in cell (S3, D4). The maximum units that can be allocated to
this cell is 7 units. This satisfies the entire demand of D4 and leaves 3 units with S3, as the remaining supply,
shown in Table 9.4.
In Table 9.4, the next smallest unit cost cell is not unique. That is, there are two cells – (S2, D3) and (S3,
D1) – that have the same unit transportation cost of 40. Allocate 7 units in cell (S2, D3) first because it can
accommodate more units as compared to cell (S3, D1). Then allocate 3 units (only supply left with S3) to cell
(S3, D1). The remaining demand of 2 units of D1 is fulfilled from S2. Since supply and demand at each supply
centre and demand centre is exhausted, the initial solution is arrived at, and is shown in Table 9.4.

D1 D2 D3 D4 Supply

19 30 50 10
S1 7
7
70 30 40 60
S2 9
2 7
40 8 70 20
S3 18
3 8 7

Demand 5 8 7 14 34 Table 9.4

The total transportation cost of the initial solution by LCM is calculated as given below:
Total cost = 7 × 10 + 2 × 70 + 7 × 40 + 3 × 40 + 8 × 8 + 7 × 20 = Rs 814
The total transportation cost obtained by LCM is less than the cost obtained by NWCM.
262 Operations Research: Theory and Applications

9.4.3 Vogel’s Approximation Method (VAM)

Vogel’s approximation (penalty or regret) is preferred over NWCR and LCM methods. In this method, an
allocation is made on the basis of the opportunity (or penalty or extra) cost that would have been incurred
if the allocation in certain cells with minimum unit transportation cost were missed. Hence, allocations are
made in such a way that the penalty cost is minimized. An initial solution obtained by using this method
is nearer to an optimal solution or is the optimal solution itself. The steps of VAM are as follows:
Step 1: Calculate the penalties for each row (column) by taking the difference between the smallest and
next smallest unit transportation cost in the same row (column). This difference indicates the penalty or
extra cost that has to be paid if decision-maker fails to allocate to the cell with the minimum unit
transportation cost.
Step 2: Select the row or column with the largest penalty and allocate as much as possible in the cell
that has the least cost in the selected row or column and satisfies the rim conditions. If there is a tie in
the values of penalties, it can be broken by selecting the cell where the maximum allocation can be made.
Step 3: Adjust the supply and demand and cross out the satisfied row or column. If a row and a column
are satisfied simultaneously, only one of them is crossed out and the remaining row (column) is assigned
a zero supply (demand). Any row or column with zero supply or demand should not be used in computing
future penalties.
Step 4: Repeat Steps 1 to 3 until the available supply at various sources and demand at various
destinations is satisfied.
Example 9.4 Use Vagel’s Approximation Method (VAM) to find the initial basic feasible solution to
the transportation problem using the data of Example 9.1.
Solution The differences (penalty costs) for each row and column have been calculated as shown in Table
9.5. In the first round, the maximum penalty, 22 occurs in column D2. Thus the cell (S3, D2) having the least
transportation cost is chosen for allocation. The maximum possible allocation in this cell is 8 units and it
satisfies demand in column D2. Adjust the supply of S3 from 18 to 10 (18 – 8 = 10).

D1 D2 D3 D4 Supply Row differences

S1 19 30 50 10 7 9 9 40 40
5 2

S2 70 30 40 60 9 10 20 20 20
7 2
S3 40 8 70 20 18 12 20 50 –
8 10

Demand 5 8 7 14 34

Column 21 22 10 10
Table 9.5 differences 21 – 10 10
Initial Solution – – 10 10
Using VAM – – 10 50

The new row and column penalties are calculated except column D2 because D2’s demand has been
satisfied. In the second round, the largest penalty, 21 appears at column D1. Thus the cell (S1, D1) having
the least transportation cost is chosen for allocating 5 units as shown in Table 9.5. After adjusting the
supply and demand in the table, we move to the third round of penalty calculations.
In the third round, the maximum penalty 50 appears at row S3. The maximum possible allocation of 10
units is made in cell (S3, D4) that has the least transportation cost of 20 as shown in Table 9.5.
The process is continued with new allocations till a complete solution is obtained. The initial solution
using VAM is shown in Table 9.5. The total transportation cost associated with this method is:
Total cost = 5 × 19 + 2 × 10 + 7 × 40 + 2 × 60 + 8 × 8 + 10 × 20 = Rs 779
 Transportation Problem 263

Example 9.5 A dairy firm has three plants located in a state. The daily milk production at each plant
is as follows:
Plant 1 : 6 million litres, Plant 2 : 1 million litres, and Plant 3 : 10 million litres
Each day, the firm must fulfil the needs of its four distribution centres. The minimum requirement of each
centre is as follows:
Distribution centre 1 : 7 million litres, Distribution centre 2 : 5 million litres,
Distribution centre 3 : 3 million litres, and Distribution centre 4 : 2 million litres
Cost (in hundreds of rupees) of shipping one million litre from each plant to each distribution centre is given
in the following table:

Distribution Centre
D1 D2 D3 D4

P1 2 3 11 7
Plant P2 1 0 6 1
P3 5 8 15 9

Find the initial basic feasible solution for given problem by using following methods:
(a) North-west corner rule
(b) Least cost method
(c) Vogel’s approximation method

Solution (a) North-West Corner Rule

Distribution Centre

D1 D2 D3 D4 Supply

2 3 11 7
P1 6 = a1
6

1 0 6 1
Plant P2 1 = a2
1

5 8 15 9
P3 10 = a3 Table 9.6
5 3 2
Initial Solution by
NWCR
Demand 7 = b1 5 = b2 3 = b3 2 = b4

(i) Comparing a1 and b1, since a1 < b1; allocate x11 = 6. This exhausts the supply at P1 and leaves
1 unit as unsatisfied demand at D1.
(ii) Move to cell (P2, D1). Compare a2 and b1 (i.e. 1 and 1). Since a2 = b1, allocate x21 = 1.
(iii) Move to cell (P3, D2). Since supply at P3, is equal to the demand at D2, D3 and D4, therefore,
allocate x32 = 5, x33 = 3 and x34 = 2.
It may be noted that the number of allocated cells (also called basic cells) are 5 which is one less than
the required number m + n – 1 (3 + 4 – 1 = 6). Thus, this solution is the degenerate solution. The
transportation cost associated with this solution is:
Total cost = Rs (2 × 6 + l × l + 8 × 5 + 15 × 3 + 9 × 2) × 100 = Rs 11,600
264 Operations Research: Theory and Applications

(b) Least Cost Method

Distribution Centre

D1 D2 D3 D4 Supply

2 3 11 7
P1 6
6

1 0 6 1
Plant P2 1
1
Table 9.7
Initial Solution by 5 8 15 9
P3 10
LCM 1 4 3 2

Demand 7 5 3 2

(i) The lowest unit cost in Table 9.7 is 0 in cell (P2, D2), therefore the maximum possible allocation that
can be made is 1 unit. Since this allocation exhausts the supply at plant P2, therefore row 2 is crossed
off.
(ii) The next lowest unit cost is 2 in cell (P1, D1). The maximum possible allocation that can be made
is 6 units. This exhausts the supply at plant P1, therefore, row P1 is crossed off.
(iii) Since the total supply at plant P3 is now equal to the unsatisfied demand at all the four distribution
centres, therefore, the maximum possible allocations satisfying the supply and demand conditions,
are made in cells (P3, D1), (P3, D2), (P3, D3) and (P3, D4).
The number of allocated cells in this case are six, which is equal to the required number
m + n – 1 (3 + 4 – 1 = 6). Thus, this solution is non-degenerate. The transportation cost associated with
this solution is
Total cost = Rs (2 × 6 + 5 × l + 8 × 4 + 15 × 3 + 9 × 2) × 100 = Rs 11,200
(c) Vogel’s Approximation Method: First calculating penalties as per rules and then allocations are made
in accordance of penalties as shown in Table 9.8.

D1 D2 D3 D4 Supply Row penalty

2 3 11 7 6 1 1 5
P1
1 5
1 0 6 1 1 0 – –
Plant P2
1
5 8 15 9 10 3 3 4
P3
6 3 1

Demand 7 5 3 2
Column penalty 1 3 5 6
Table 9.8 3 5 4 2
Initial Solution by 3 – 4 2
VAM Distribution Centre

The number of allocated cells in Table 9.8 are six, which is equal to the required number
m + n – 1 (3 + 4 – 1 = 6), therefore, this solution is non-degenerate. The transportation cost associated
with this solution is:
Total cost = Rs (2 × 1 + 3 × 5 + 1 × 1 + 5 × 6 + 15 × 3 + 9 × 1) × 100 = Rs 10,200
Remark: Total transportation cost found by VAM is lower than the costs of transportation determined
by the NWCR and LCM methods. Therefore, it is of advantage to use this method in order to reduce
computational time required to obtain optimum solution.
 Transportation Problem 265

CONCEPTUAL QUESTIONS A

1. Show that all the bases for a transportation problem are 8. What is meant by the triangular form of a system of linear
triangular. equations? When does a system of linear equations have a
2. With reference to a transportation problem define the following triangular basis? (See Appendix for proof.)
terms: 9. What is meant by non-degenerate basic feasible solution of a
ii(i) Feasible solution v(ii) Basic feasible solution transportation problem?
(iii) Optimal solution 10. Explain in brief three, methods of initial feasible solution for
(iv) Non-degenerate basic feasible solution transportation problem.
3. Given a mathematical formulation of the transportation problem 11. Explain the various steps involved in solving transportation
and the simplex methods, what are the differences in the nature problem using (i) Least cost method, and (ii) Vogel’s
of problems that can be solved by using these methods? approximation method.
4. Prove that there are only m + n – 1 independent equations in 12. Explain the (i) North-West Corner method, (ii) Least-Cost method,
a transportation problem, m and n being the number of origins and (iii) Vogel’s Approximation method, for obtaining an initial
and destination, and only one equation can be dropped as being basic feasible solution of a transportation problem.
redundant. (For proof see Appendix).
13. State the transportation problem. Describe clearly the steps
5. Describe the transportation problem with its general mathematical
involved in solving it.
formulation.
14. Is the transportation model an example of decision-making
6. Show that a transportation problem is a special type of LP under certainty or under uncertainty? Why?
problem. In what areas of management can the transportation
model be effectively used? Discuss. 15. Why does Vogel’s approximation method provide a good initial
feasible solution? Can the North-West Corner method ever be
7. What are the characteristics of transportation problem of linear able to provide an initial solution with a cost as low as this?
programming?

SELF PRACTICE PROBLEMS A

1. Determine an initial basic feasible solution to the following 3. Determine an initial basic feasible solution to the following
transportation problem by using (a) NWCR, (b) LCM and (c) transportation problem by using (a) NWCM, (b) LCM, and (c)
VAM. VAM.
Destination Destination

D1 D2 D3 D4 Supply D1 D2 D3 D4 Supply

S1 21 16 15 3 11 A 11 13 17 14 250
Source S2 17 18 14 23 13 Source B 16 18 14 10 300
S3 32 27 18 41 19 C 21 24 13 10 400

Demand 6 6 8 23 Demand 200 225 275 250

2. Determine an initial basic feasible solution to the following 4. Determine an initial basic feasible solution to the following
transportation problem by using (a) the least cost method, and transportation problem by using the North-West corner rule,
(b) Vogel’s approximation method. where O i and Dj represent ith origin and jth destination,
respectively.
Destination
Destination

D1 D2 D3 D4 Supply D1 D2 D3 D4 Supply
S1 1 2 1 4 30 O1 6 4 1 5 14
Source S2 3 3 2 1 30 Source O2 8 9 2 7 16
S3 4 2 5 9 40 O3 4 3 6 2 5

Demand 20 40 30 10 Demand 6 10 15 4

HINTS AND ANSWERS

1. x14 = 11, x21 = 6, x22 = 3, x24 = 4, x32 = 3, x33 = 4, x34 = 12; Total cost = 686.
2. (a) and (b): x11 = 20, x13 = 10, x22 = 20, x33 = 20, x24 = 10, x32 = 20; Total cost = 180.
3. (a) x11 = 200, x12 = 50, x22 = 175, x23 = 125, x33 = 150, x34 = 250; Total cost = 12,200.
(b) x11 = 200, x12 = 50, x22 = 175, x23 = 125, x33 = 150, x34 = 250; Total cost = 12,200.
(c) x11 = 200, x12 = 50, x22 = 175, x24 = 125, x33 = 275, x34 = 125; Total cost = 12,075.
4. x11 = 6; x12 = 8; x22 = 2; x23 = 14; x33 = 1; x34 = 4 ; Total cost = Rs 128.
266 Operations Research: Theory and Applications

9.5 TEST FOR OPTIMALITY

Once an initial solution is obtained, the next step is to check its optimality in terms of feasibility of the solution
and total minimum transportation cost.
The test of optimality begins by calculating an opportunity cost associated with each unoccupied cell
(represents unused route) in the transportation table. An unoccupied cell with the largest negative
opportunity cost is selected to include in the new set of transportation routes (allocations). This value
indicates the per unit cost reduction that can be achieved by making appropriate allocation in the
unoccupied cell. This cell is also known as an incoming cell (or variable). The outgoing cell (or variable)
The negative from the current solution is the occupied cell (basic variable) where allocation will become zero as allocation
opportunity cost is made in the unoccupied cell with the largest negative opportunity cost. Such an exchange reduces the
indicates the per
unit cost reduction
total transportation cost. The process is continued until there is no negative opportunity cost. That is, the
that can be current solution is an optimal solution.
achieved by raising The Modified-distribution (MODI) method (also called u-v method or method of multipliers) is used
the shipment to calculate opportunity cost associated with each unoccupied cell and then improving the current solution
allocation in the
unoccupied cell from
leading to an optimal solution. The steps of MODI method based on the concept of duality are summarized
its present level of in section 9.5.3.
zero.
9.5.1 Dual of Transportation Model
For a given basic feasible solution if we associate numbers (also called dual variables or multipliers) ui
and vj with row i (i = 1, 2, . . ., m) and column j ( j = 1, 2, . . ., n) of the transportation table, respectively,
then ui and vj must satisfy the equation
ui + vj = cij , for each occupied cell (i, j)
These equations yield m + n – 1 equations in m + n unknown dual variables. The values of these
variables can be determined by arbitrarily assigning a zero value to any one of these variables. The value
of the remaining m + n – 2 variables can then be obtained algebraically by using the above equation for
the occupied cells. The opportunity cost of each unoccupied cell (called non-basic variable or unused
route) is calculated by using following equation that involves ui and vj values.:
drs = crs – (ur + vs ) , for each unoccupied cell (r, s)
This equation also indicates the per unit reduction in the total transportation cost for the route (r, s). To
prove these two results, consider the general transportation model:
m n
Minimize Z = Σ Σ cij xij
i =1 j =1

subject to the constraints

n
Σ xij = ai , i = 1, 2, . . ., m (Supply)
j =1
Modi method helps m
in comparing the Σ xij = bj , j = 1, 2, . . ., n (Demand)
relative advantage i =1
of alternative
allocations for all the
and xij ≥ 0 for all i and j
unoccupied cells Since all of the constraints are equalities, write each equality constraint equivalent to two inequalities
simultaneously.
as follows:
n 
Σ xij ≥ a , i = 1, 2, . . ., m 
j =1 i
 (Supply constraints)
n 
Σ – (xij) ≥ – ai 
j =1
m
Σ xij ≥ bj , 
j = 1, 2, . . ., m
i =1 

m  (Demand constraints)
Σ – (xij) ≥ – bj 
i =1

Let ui+ and ui be the dual variables, one for each supply constraint i. Similarly v j+ , v j− be the dual
−

variables one for each demand constraint j. Then, the dual of the transportation model can be written as:
 Transportation Problem 267

m n
Maximize Z * = Σ ( ui+ − ui− ) a i + Σ ( vj + − vj− ) bj
i =1 j =1
subject to the constraints
( u i+ − u i− ) + ( vj + − vj − ) ≤ cij
and u i+ , u i− , vj + , vj − ≥ 0 , for all i and j.
The variables ui+
and ui−
that appear in the objective function, may take positive, negative or zero
values. Thus, either of these will appear in the optimal basic feasible solution because one is the negative
of the other. The same argument may be given for vj+ and vj −. Thus, let
ui = ui+ − ui− , i = 1, 2, . . ., m
vj = vj + − vj − , j = 1, 2, . . ., n`
The values of ui and vj will then be unrestricted in sign. Hence, the dual of the transportation model can
now be written as
m n
Maximize Z * = Σ ui ai + Σ v j b j
i =1 j =1
subject to the constraints
ui + vj ≤ cij
and ui, vj unrestricted in sign for all i and j.
The relationship (cij – ui – vj) xij = 0 is known as complementary slackness for a transportation problem
and indicates that
(a) if xij > 0 and solution is feasible, then cij – ui – vj = 0 or cij = ui + vj, for each occupied cell,
(b) if xij = 0 and cij > ui + vj, then it is not desirable to have xij > 0 in the solution mix because it would
cost more to transport on a route (i, j),
(c) if cij ≤ ui + vj for some xij = 0, then xij can be brought into the solution mix.

9.5.2 Economic Interpretation of ui’s and vj’s

The ui values measures the comparative advantage of additional unit of supply or shadow price (or value) The dual variables
of available supply at centre i. This may also be termed as location rent. Similarly, the vj values measures ui s and vj s
the comparative advantage of an additional unit of commodity demanded at demand centre j. This may also represent the
shadow price (value
be termed as market price.
of the commodity)
Illustration The concept of duality in transportation problem is applied on Example 9.1 in the following manner: for the supply
centres and demand
Reproducing transportation data of Example 9.1 for ready reference in Table 9.9. In Table 9.9, there are centres,
m = 3 rows and n = 4 columns. Let u1, u2 and u3 be dual variables corresponding to each of the supply respectively.
constraint in that order. Similarly, v1, v2, v3 and v4 be dual variables corresponding to each of demand
constraint in that order. The dual problem then becomes
D1 D2 D3 D4 Supply ui

S1 19 30 50 10 7 u1

S2 70 30 40 60 9 u2

S3 40 8 70 20 18 u3

Demand 5 8 7 14 34

vj v1 v2 v3 v4 Table 9.9

Maximize Z = (7u1 + 9u2 + 18u3) + (5v1 + 8v2 + 7v3 + 14v4)

subject to the constraints
(i) u1 + v1 ≤ 19, (ii) u1 + v2 ≤ 30, (iii) u1 + v3 ≤ 50, (iv) u1 + v4 ≤ 10,
(v) u2 + v1 ≤ 70, (vi) u2 + v2 ≤ 30, (vii) u2 + v3 ≤ 40, (viii) u2 + v4 ≤ 60,
(ix) u3 + v1 ≤ 40, (x) u3 + v2 ≤ 8, (xi) u3 + v3 ≤ 70, (xii) u3 + v4 ≤ 20,
and ui, vj unrestricted in sign for all i and j.
268 Operations Research: Theory and Applications

Interpretation Consider the dual constraint u1 + v1 ≤ 19 or v1 ≤ 19 – u1. This represents the delivered
market value of the commodity at destination D1 which should be less than or equal to the unit cost of
transportation from S1 to D1 minus the per unit value of commodity at D1. A similar interpretation can also
be given for other constraints.
The optimal value of dual variables can be obtained either by simplex method or by reading values of
these variables from the optimal solution of transportation problem. It may be noted that the total
transportation cost at optimal solution would be the same as obtained by putting values of ui’s and vj’s from
optimal solution of transportation problem in the dual objective function:
3 4
Maximize Z = Σ ai ui + Σ b j v j
i =1 j =1

9.5.3 Steps of MODI Method (Transportation Algorithm)

The steps to evaluate unoccupied cells are as follows:
Step 1: For an initial basic feasible solution with m + n – 1 occupied cells, calculate ui and vj for rows
and columns. The initial solution can be obtained by any of the three methods discussed earlier.
To start with, any one of uis or vjs is assigned the value zero. It is better to assign zero to a particular
ui or vj where there are maximum number of allocations in a row or column respectively, as this will reduce
the considerably arithmetic work. The value of uis and vjs for other rows and columns is calculated by using
the relationship.
cij = ui + vj , for all occupied cells (i, j).
Step 2: For unoccupied cells, calculate the opportunity cost by using the relationship
dij = cij – (ui + vj) , for all i and j.
Step 3: Examine sign of each dij
(i) If dij > 0, then the current basic feasible solution is optimal.
(ii) If dij = 0, then the current basic feasible solution will remain unaffected but an alternative solution
Changing the exists.
shipping route
involves adding to (iii) If one or more dij < 0, then an improved solution can be obtained by entering an unoccupied cell
cells on the closed (i, j) into the solution mix (basis). An unoccupied cell having the largest negative value of dij is
path with plus signs
chosen for entering into the solution mix (new transportation schedule).
and subtracting from
cells with negative Step 4: Construct a closed-path (or loop) for the unoccupied cell with largest negative value of dij. Start
signs.
the closed path with the selected unoccupied cell and mark a plus sign (+) in this cell. Trace a path along
the rows (or columns) to an occupied cell, mark the corner with a minus sign (–) and continue down the
column (or row) to an occupied cell. Then mark the corner with plus sign (+) and minus sign (–) alternatively.
Close the path back to the selected unoccupied cell.
Step 5: Select the smallest quantity amongst the cells marked with minus sign on the corners of closed
loop. Allocate this value to the selected unoccupied cell, add it to occupied cells marked with plus signs,
and subtract it from the occupied cells marked with minus signs.
Step 6: Obtain a new improved solution by allocating units to the unoccupied cell according to Step
5 and calculate the new total transportation cost.
Step 7: Test optimality of the revised solution. The procedure terminates when all dij ≥ 0 for unoccupied
cells.
Remarks 1. The closed-loop (path) starts and ends at the selected unoccupied cell. It consists of
successive horizontal and vertical (connected) lines whose end points must be occupied cells, except an
end point associated with entering unoccupied cell. This means that every corner element of the loop must
be an occupied cell.
It is immaterial whether the loop is traced in a clockwise or anti-clockwise direction and whether it starts
up, down, right or left (but never diagonally). However, for a given solution only one loop can be
constructed for each unoccupied cell.
2. There can only be one plus (+) sign and only one minus (–) sign in any given row or column.
3. The closed path indicates changes involved in reallocating the shipments.
 Transportation Problem 269

Fig. 9.1
Flow Chart of
MODI Method

The steps of MODI method for solving a transportation problem are summarized in the flow chart
shown in Fig. 9.1.

9.5.4 Close-Loop in Transportation Table and its Properties

Any basic feasible solution must contain m + n – 1 non-zero allocations provided. An ordered set of at
(i) any two adjacent cells of the ordered set lie either in the same row or in the same column, and least four cells in a
(ii) no three or more adjacent cells in the ordered set lie in the same row or column. The first cell of the set must transportation table
follow the last in the set, i.e. each cell (except the last) must appear only once in the ordered set. forms a loop.
Consider the following two cases represented in Tables 9.10(a) and 9.10(b). In Table 9.10(a), if we join
the positive allocations by horizontal and vertical lines, then a closed loop is obtained. The ordered set
of cells forming a loop is:
L = {(a, 2), (a, 4), (e, 4), (e, 1), (b, 1), (b, 2), (a, 2)}
The loop in Table 9.10(b) is not allowed because it does not satisfy the conditions in the definition
of a loop. That is, the cell (b, 2) appears twice.

Table 9.10

(a) (b)
270 Operations Research: Theory and Applications

Remarks 1. Every loop has an even number of cells and has at least four cells.
2. The allocations are said to be in independent position if it is not possible to increase or decrease any
individual allocation without changing the positions of these allocations, or if a closed loop cannot
be formed through these allocations without violating the rim conditions.
3. Each row and column in the transportation table should have only one plus and minus sign. All cells
that have a plus or a minus sign, except the starting unoccupied cell, must be occupied cells.
4. Closed loops may or may not be in the shape of a square.
Example 9.6 Apply MODI method to obtain optimal solution of transportation problem using the data
of Example 9.1.

D1 D2 D3 D4 Supply

S1 19 30 50 10 17

S2 70 30 40 60 9

S3 40 18 70 20 18

Demand 5 8 7 14 34

Solution Applying Vogel’s approximation method to obtain an initial basic feasible solution. This
solution is shown in Table 9.11 [for ready reference see Table 9.5].
1. In Table 9.11, since number of occupied cells are m + n – 1 = 3 + 4 – 1 = 6 (as required), therefore
this initial solution is non-degenerate. Thus, an optimal solution can be obtained. The total transportation
cost associated with this solution is Rs 779.
2. In order to calculate the values of uis (i = 1, 2, 3) and vjs ( j = 1, 2, 3, 4) for each occupied cell, assigning
arbitrarily, v4 = 0 in order to simplify calculations. Given v4 = 0, u1, u2 and u3 can be immediately
computed by using the relation cij = ui + vj for occupied cells, as shown in Table 9.11.

D1 D2 D3 D4 Supply ui

S1 19 30 50 10 u1 = 10
5 + 32 + 60 2 7

S2 70 30 40 60 u2 = 60
+1 (+) 7 2 (–) 9
– 18
S3 40 8 70 20 u3 = 20
(–) 8 10 (+) 18
+ 11 + 70

Table 9.11 Demand 5 8 7 14 34

Initial Solution,
VAM vj v1 = 9 v2 = – 12 v3 = – 20 v4 = 0

c34 = u3 + v4 or 20 = u3 + 0 or u3 = 20
c24 = u2 + v4 or 60 = u2 + 0 or u2 = 60
c14 = u1 + v4 or 10 = u1 + 0 or u1 = 10
Given u1, u2, and u3, value of v1, v2 and v3 can also be calculated as shown below:
c11 = u1 + v1 or 19 = 10 + v1 or v1 = – 19
c23 = u2 + u3 or 40 = 60 + v3 or v3 = – 20
c32 = u3 + v2 or 8 = 20 + v2 or v2 = – 12
 Transportation Problem 271

3. The opportunity cost for each of the occupied cell is determined by using the relation
dij = cij – (ui + vj) and is shown below.
d12 = c12 – (u1 + v2) = 30 – (10 – 12) = 32
d13 = c13 – (u1 + v3) = 50 – (10 – 20) = 60
d21 = c2l – (u2 + v1 ) = 70 – (60 + 19) = 1
d22 = c22 – (u2 + v2) = 30 – (60 – 12) = – 18
d31 = c31 – (u3 + v1) = 40 – (20 + 19) = 11
d33 = c33 – (u3 + v3) = 70 – (20 – 20) = 70
4. According to the optimality criterion for cost minimizing transportation problem, the current solution
is not optimal, since the opportunity costs of the unoccupied cells are not all zero or positive. The
value of d22 = – 18 in cell (S2, D2) is indicating that the total transportation cost can be reduced in
the multiple of 18 by shifting an allocation to this cell.
5. A closed-loop (path) is traced along row S2 to an occupied cell (S3, D2). A plus sign is placed in cell
(S2, D2) and minus sign in cell (S3, D2). Now take a right-angle turn and locate an occupied cell in
column D4. An occupied cell (S3, D4) exists at row S3, and a plus sign is placed in this cell.
Continue this process and complete the closed path. The occupied cell (S2, D3) must be bypassed
otherwise they will violate the rules of constructing closed path.
6. In order to maintain feasibility, examine the occupied cells with minus sign at the corners of closed loop,
and select the one that has the smallest allocation. This determines the maximum number of units that
can be shifted along the closed path. The minus signs are in cells (S3, D2) and (S2, D4). The cell
(S2, D4) is selected because it has the smaller allocation, i.e. 2. The value of this allocation is then added
to cell (S2, D2) and (S3, D4), which carry plus signs. The same value is subtracted from cells (S2, D4)
and (S3, D2) because they carry minus signs.
7. The revised solution is shown in Table 9.12. The total transportation cost associated with this solution
is:
Total cost = 5 × 19 + 2 × 10 + 2 × 30 + 7 × 40 + 6 × 8 + 12 × 20 = Rs 743

D1 D2 D3 D4 Supply ui

S1 19 30 50 10 u1 = 0
5 +32 +42 2 7

S2 70 30 40 60 u2 = 32
+ 19 2 7 +14 9

S3 40 8 70 20 u3 = 10
+ 11 6 + 52 12 18

Demand 5 8 7 14 34
Table 9.12
vj v1 = 19 v2 = – 2 v3 = 8 v4 = 10 Optimal Solution

8. Test the optimality of the revised solution once again in the same way as discussed in earlier steps.
The values of uis, vjs and dijs are shown in Table 9.12. Since each of dijs is positive, therefore, the
current basic feasible solution is optimal with a mi]nimum total transportation cost of Rs 743.

Example 9.7 A company has factories at F1, F2, and F3 that supply products to warehouses at W1, W2
and W3. The weekly capacities of the factories are 200, 160 and 90 units, respectively. The weekly warehouse
requirements are 180, 120 and 150 units, respectively. The unit shipping costs (in rupees) are as follows:
272 Operations Research: Theory and Applications

Warehouse
W1 W2 W3 Supply

F1 16 20 12 200
Factory F2 14 8 18 160
F3 26 24 16 90

Demand 180 120 150 450

Determine the optimal distribution for this company in order to minimize its total shipping cost.
Solution Initial basic feasible solution obtained by North-West Corner Rule is given in Table 9.13.
Since, as required, this initial solution has m + n – l = 3 + 3 – l = 5 allocations, it is a non-degenerate solution.
The optimality test can, therefore, be performed. The total transportation cost associated with this solution is:

W1 W2 W3 Supply

F1 16 20 12
180 20 200

F2 14 8 18
100 60 160

F3 26 24 16
90 90
Table 9.13
Initial Solution Demand 180 120 150 450

Total cost = 16 × 180 + 20 × 20 + 8 × 100 + 18 × 60 + 16 × 90 = Rs 6,800

Determine the values of uis and vjs as usual, by arbitrarily assigning u1 = 0. Given u1 = 0, the values
of others variables obtained by using the equation cij = ui + vj for occupied cells, are shown in Table 9.14.

W1 W2 W3 Supply ui

At each step a non- F1 16 20 12 u1 = 0

occupied cell with 180 (–) 20 (+) 200
largest negative – 18
opportunity cost is
selected to get F2 14 8 18 u2 = – 12
maximum reduction (+) 100 60 (–) 160
in total
+10
transportation cost.
F3 26 24 16 u3 = – 14
90 90
+24 +18

Demand 180 120 150 450

Table 9.14 vj v1 = 16 v2 = 20 v3 = 30

c11 = u 1 + v1 or 16 = 0 + v1 or v1 = 16
c12 = u 1 + v2 or 20 = 0 + v2 or v2 = 20
c22 = u2 + v2 or 8 = u2 + 20 or u2 = – 12
c23 = u2 + v3 or 18 = –12 + v3 or v3 = – 30
c33 = u3 + v3 or 16 = u3 + 30 or u3 = – 14
 Transportation Problem 273

The opportunity cost for each of the unoccupied cells is determined by using the equation,
dij = cij – (ui + vj) as follows:

d13 = c13 – (u1 + v3) = 12 – (0 + 30) = – 18

d21 = c21 – (u2 + v1) = 14 – (–12 + 16) = – 10
d31 = c31 – (u3 + v1) = 26 – (–14 + 16) = – 24
d32 = c32 – (u3 + v2) = 24 – (–14 + 20) = – 18

The value of d13 = – 18 in the cell (F1, W3) indicates that the total transportation cost can be
reduced in a multiple of 18 by introducing this cell in the new transportation schedule. To see how many
units of the commodity could be allocated to this cell (route), form a closed path as shown in
Table 9.14.
The largest number of units of the commodity that should be allocated to the cell (F1, W3) is 20 units
because it does not violate the supply and demand restrictions (minimum allocation among the occupied
cells bearing negative sign at the corners of the loop). The new transportation schedule (solution) so
obtained is shown in Table 9.15.

W1 W2 W3 Supply

F1 16 20 12
180 20 200

F2 14 8 18
120 40 160

F3 26 24 16
90 90

Demand 180 120 150 450 Table 9.15

Revised Schedule

The total transportation cost associated with this solution is

Total cost = 16 × 180 + 12 × 20 + 8 × 120 + 18 × 40 + 16 × 90 = Rs 6,240
To test the optimality of the new solution shown in Table 9.15, again calculate the opportunity cost
of each unoccupied cell in the same manner as discussed earlier. The calculations for uis, vjs and dijs are
shown in Table 9.16.
c13 = u1 + v3 or 12 = u1 + 0 or u1 = – 12
c23 = u2 + v3 or 18 = u2 + 0 or u2 = – 18
c33 = u3 + v3 or 16 = u3 + 0 or u3 = – 16
c11 = u1 + v1 or 16 = 12 + v1 or v1 = – 14
c22 = u2 + v2 or 8 = 18 + v2 or v2 = – 10

d12 = c12 – (u1 + v2) or 20 – (12 – 10) = –18

d21 = c21 – (u2 + v1) or 14 – (18 + 4) = – 8
d31 = c31 – (u3 + v1) or 26 – (16 + 4) = –16
d32 = c32 – (u3 + v2) or 24 – (16 – 10) = 18

The value of d21 = – 8 in the cell (F2, W1) indicates that the total cost of transportation can further
be reduced in a multiple of 8 by introducing this cell in the new transportation schedule. The new solution
is obtained by introducing 40 units of the commodity in the cell (F2, W1), as indicated in Table 9.16. The
new solution is shown in Table 9.17.
274 Operations Research: Theory and Applications

W1 W2 W3 Supply ui

F1 16 20 12 u1 = 12
(–) 180 20 (+) 200
18

F2 14 8 18 u2 = 18
(+) 120 40 (–) 160
–8

F3 26 24 16 u3 = 16
90 90
6

Demand 180 120 150

Table 9.16 vj v1 = 4 v2 = – 10 v3 = 0

W1 W2 W3 Supply

F1 16 20 12
140 60 200

F2 14 8 18
40 120 160

F3 26 24 16
90 90

Table 9.17
Demand 180 120 150
Revised Schedule

The total transportation cost associated with this solution is

Total cost = 16 × 140 + 12 × 60 + 14 × 40 + 8 × 120 + 16 × 90 = Rs 5,920
To test the optimality of the new solution shown in Table 9.17, calculate again the opportunity cost
of each unoccupied cell in the same manner as discussed earlier. The calculations are shown in Table 9.18.

W1 W2 W3 Supply ui

F1 16 20 12 u1 = 16
140 +10 60 200

F2 14 8 18 u2 = 14
40 120 +8 160

F3 26 24 16 u3 = 20
+6 +10 90 90

Demand 180 120 150

Table 9.18 vj v1 = 0 v2 = – 6 v3 = – 4

d12 = c12 – (u1 + v2) or 20 – (16 – 6) = 10

d23 = c23 – (u2 + v3) or 18 – (14 – 4) = 18
d31 = c31 – (u3 + v1) or 26 – (20 + 0) = 16
d32 = c32 – (u3 + v2) or 24 – (20 – 6) = 10
 Transportation Problem 275

Since none of the unoccupied cells in Table 9.18 has a negative opportunity cost value, therefore, the
total transportation cost cannot be reduced further. Thus, the solution shown in Table 9.18 is the optimal
solution, giving the optimal transportation schedule with a total cost of Rs 5,920.

Example 9.8 The following table provides all the necessary information on the availability of supply
to each warehouse, the requirement of each market, and the unit transportation cost (in Rs) from each
warehouse to each market.
Market
P Q R S Supply

A 6 3 5 4 22
Warehouse B 5 9 2 7 15
C 5 7 8 6 8
Demand 7 12 17 9 45

The shipping clerk of the shipping agency has worked out the following schedule, based on his own
experience: 12 units from A to Q, 1 unit from A to R, 9 units from A to S, 15 units from B to R, 7 units from
C to P and 1 unit from C to R.
(a) Check and see if the clerk has the optimal schedule.
(b) Find the optimal schedule and minimum total transport cost.
(c) If the clerk is approached by a carrier of route C to Q, who offers to reduce his rate in the hope of
getting some business, by how much should the rate be reduced before the clerk would offer him the
business.
Solution (a) The shipping schedule determined by the clerk based on his experience is shown in
Table 9.19. The total transportation cost associated with this solution is
Total cost = 3 × 12 + 5 × 1 + 4 × 9 + 2 × 15 + 5 × 7 + 8 × 1 = Rs 150
Since the number of occupied cells (i.e. 6) is equal to the required number of occupied cells (i.e.
m + n – 1) in a feasible solution, therefore the solution is non-generate feasible solution. Now, to test the
optimality of the solution given in Table 9.19, evaluate each unoccupied cell in terms of the opportunity
cost associated with it. This is done in the usual manner and is shown in Table 9.20.

P Q R S Supply

A 6 3 5 4
12 1 9 22
B 5 9 2 7
15 15
C 5 7 8 6
7 1 8
Table 9.19
Demand 7 12 17 9 45 Initial Solution

In Table 9.20, cell (C, S) has a negative opportunity cost (i.e. – 1). Thus, this solution is not the optimal
solution and, therefore, the schedule prepared by the shipping clerk is not optimal.
(b) By forming a closed-loop to introduce the cell (C, S) into the new transportation schedule as shown
in Table 9.20, we get a new solution that is shown in Table 9.21.
276 Operations Research: Theory and Applications

P Q R S Supply ui

A 6 3 5 4 u1 = 0

+4 12 (+) 1 9 (–) 22

B 5 9 2 7 u2 = – 3
15 15
+9 +6
C 5 7 8 6 u3 = 3
7 (–) 1 (+) 8
+1 –1

Demand 7 12 17 9 45

Table 9.20 vj v1 = 2 v2 = 3 v3 = 5 v4 = 4

While testing the optimality of the improved solution shown in Table 9.21, we found that the
opportunity costs in all the unoccupied cells are positive. Thus the current solution is optimal and the
optimal schedule is to transport 12 units from A to Q; 2 units from A to R; 8 units from A to S; 15 units
from B to R; 7 units from C to P and 1 unit from C to S. The total minimum transportation cost associated
with this solution is
Total cost = 3 × 12 + 5 × 2 + 4 × 8 + 2 × 15 + 5 × 7 + 6 × 1 = Rs 149

P Q R S Supply ui

A 6 3 5 4 u1 = 0

+3 12 2 8 22

B 5 9 2 7 u2 = – 3

+5 +9 15 +6 15

C 5 7 8 6 u3 = 2
7 +2 +1 1 8

Demand 7 12 17 9 45
Table 9.21
Optimal Solution vj v1 = 3 v2 = 3 v3 = 5 v4 = 4

(c) The total transportation cost will increase by Rs 2 (opportunity cost) if one unit of commodity is
transported from C to Q. This means that the rate of the carrier on the route C to Q should be reduced
by Rs 2, i.e. from Rs 7 to Rs 5 so as to get some business of one unit of commodity only.
In case all the 8 units available at C are shipped through the route (C, Q), then the solution presented
in Table 9.21 may be read as shown in Table 9.22.

P Q R S Supply

A 6 3 5 4
7 4 2 9 22

B 5 9 2 7
15 15

C 5 7 8 6
8 8

Table 9.22 Demand 7 12 17 9 45

 Transportation Problem 277

The total cost of transportation associated with this solution is

Total cost = 6 × 7 + 3 × 4 + 5 × 2 + 4 × 9 + 2 × 15 + 7 × 8 = Rs 186.
Thus, the additional cost of Rs 37 (= 186 – 149) should be reduced from the transportation cost of 8 units
from C to Q. Hence transportation cost per unit from C to Q should be at the most 7 – (37/8) = Rs 2.38.

Example 9.10 ABC Limited has three production shops that supply a product to five warehouses. The
cost of production varies from shop to shop and cost of transportation from one shop to a warehouse also
varies. Each shop has a specific production capacity and each warehouse has certain amount of
requirement. The costs of transportation are given below:
Warehouse
I II III IV V Supply

A 6 4 4 7 5 100

Shop B 5 6 7 4 8 125

C 3 4 6 3 4 175

Demand 60 80 85 105 70 400

The cost of manufacturing the product at different production shops is

Shop Variable Cost Fixed Cost

A 14 7,000
B 16 4,000
C 15 5,000

Find the optimum quantity to be supplied from each shop to different warehouses at the minimum total
cost. [Delhi Univ., MBA, 2007]
Solution In this case, the fixed cost data is of no use. The transportation cost matrix will include the
given transportation cost plus the variable cost, as shown in Table 9.23.

I II III IV V Supply

A 6 + 14 = 20 4 + 14 = 18 4 + 14 = 18 7 + 14 = 21 5 + 14 = 19 100

B 5 + 16 = 21 6 + 16 = 22 7 + 16 = 23 4 + 16 = 20 8 + 16 = 24 125

C 3 + 15 = 18 4 + 15 = 19 6 + 15 = 21 3 + 15 = 18 4 + 15 = 19 175

Demand 60 80 85 105 70 400 Table 9.23

The optimal solution obtained by applying MODI method is shown in Table 9.24.

I II III IV V Supply ui

A 20 18 18 21 19 u1 = 18
15 85 100
+3 +5 +1

B 21 22 23 20 24 u2 = 22
20 105 125
0 +1 +2

C 18 19 21 18 19 u3 = 19
60 45 70 175
+2 +1

Demand 60 80 85 105 70
Table 9.24
vj v1 = – 1 v2 = 0 v3 = 0 v4 = – 2 v5 = 0 Optimal Solution
278 Operations Research: Theory and Applications

The transportation cost associated with the solution is

Total cost = 18 × 15 + 18 × 85 + 22 × 20 + 20 × 105 + 18 × 60 + 19 × 45 + 19 × 70 = Rs 7,605

CONCEPTUAL QUESTIONS B

1. Describe the computational procedure of the optimality test in m n

a transportation problem. Σ Si = Σ D j
i =1 j =1
2. Indicate how you will test for optimality of initial feasible solution Symbolically state the transportation problem. Establish that the
of a transportation problem. optimal solution is not altered when the cij’s are replaced by
3. Let Si and Dj (i = 1, 2, . . ., m; j = 1, 2, . . ., n) be the supply c ij* s, where c ij* = cij + ui + vj, ui (i = 1, 2, . . ., m) and vj ( j
and demand available, respectively, for a commodity at m
godowns and n markets. Let cij be the cost of transporting one = 1, 2, . . ., n) are arbitrary real numbers.
unit of the commodity from godown i to market j. Assuming that

SELF PRACTICE PROBLEMS B

1. Consider four bases of operation Bi and three targets Tj. The product to the five customers. The net unit cost of transporting
tons of bombs per aircraft from any base that can be delivered from the three plants to the five customers is given below:
to any target are given in the following table:
Customers
Target (Tj )
A B C D E
T1 T2 T3
I 4 1 3 4 4
B1 8 6 5
Plants II 2 3 2 2 3
Base (Bi ) B2 6 6 6
B3 10 8 4 III 3 5 2 4 4

B4 8 6 4 4. The following table gives the cost of transporting material from

supply points A, B, C and D to demand points E, F, G, H and I.
The daily sortie capability of each of the four bases is 150
sorties per day. The daily requirement of sorties spread over To
each individual target is 200. Find the allocation of sorties from
E F G H I
each base to each target which maximizes the total tonnage
over all three targets. Explain each step in the process. A 8 10 12 17 15
2. A company has four warehouses, a, b, c and d. It is required From B 15 13 18 11 9
to deliver a product from these warehouses to three customers
A, B and C. The warehouses have the following amounts in C 14 20 6 10 13
stock:
D 13 19 7 15 12
Warehouse : a b c d
No. of units : 15 16 12 13 The present allocation is as follows:
and the customers’ requirements are A to E 90; A to F 10; B to F 150; C to F 10; C to G 50; C to
Customer : A B C I 120; D to H 210; D to I 70.
No. of units : 18 20 18 (a) Check if this allocation is optimum. If not, find an optimum
The table below shows the costs of transporting one unit from schedule.
warehouse to the customer. (b) If in the above problem, the transportation cost from A to
G is reduced to 10, what will be the new optimum schedule?
Warehouse
5. A whole selling company has three warehouses from which the
a b c d supplies are drawn for four retail customers. The company
A 8 9 6 3 deals in a single product, the supplies of which at each
warehouse are:
Customer B 6 11 5 10
Warehouse Supply Customer Demand
C 3 8 7 9 Number (units) Number (units)

Find the optimal transportation routes. 1 20 1 15

3. A firm manufacturing a single product has three plants I, II and 2 28 2 19
III. They have produced 60, 35 and 40 units, respectively during 3 17 3 13
this month. The firm had made a commitment to sell 22 units to 4 18
customer A, 45 units to customer B, 20 units to customer C, 18
Total supply at the warehouses is equal to total demand from
units to customer D and 30 units to customer E. Find the
the customers. The table below gives the transportation costs,
minimum possible transportation cost of shifting the manufactured
per unit, shipped from each warehouse to each customer.
 Transportation Problem 279

Customer Calculate a transportation plan that will minimize the distribution

cost for the steel company. State the cost of this distribution
C1 C2 C3 C4 plan.
9. A company has three factories at Amethi, Baghpat and Gwalior
W1 3 6 8 5 that have a production capacity of 5,000, 6,000, and 2,500
tonnes, respectively. Four distribution centres at Allahabad,
Warehouse W2 6 1 2 5 Bombay, Kolkata and Delhi, require 6,000 tonnes, 4,000 tonnes,
2,000 tonnes and 1,500 tonnes, respectively, of the product.
W3 7 8 3 9
The transportation costs per tonne from different factories to
Determine what supplies should be dispatched from each of the different centres are given below:
warehouses to each customer so as to minimize the overall
transportation cost. Factories Distribution Centres
6. A manufacturer has distribution centres at Agra, Allahabad and
Kolkata. These centres have availability of 40, 20 and 40 units of Allahabad Bombay Kolkata Delhi
his product, respectively. His retail outlets at A, B, C, D and E Amethi 3 2 7 6
require 25, 10, 20, 30 and 15 units of the products, respectively.
The transport cost (in rupees) per unit between each centre outlet Baghpat 7 5 2 3
is given below: Gwalior 2 5 4 5

Distribution Retail Outlets Suggest an optimum transportation schedule and find the minimum
Centre cost of transportation.
A B C D E
10. A company has three plants and four warehouses. The supply
Agra 55 30 40 50 40 and demand in units and the corresponding transportation costs
are given. The table below has been taken from the solution
Allahabad 35 30 100 45 60 procedure of a transportation problem:
Kolkata 40 60 95 35 30 Warehouses

Determine the optimal distribution so as to minimize the cost of I II III IV Supply

transportation. [Delhi Univ., MBA, 2002]
7. A manufacturer has distribution centres located at Agra, Allahabad A 5 10 4 10 5 10
and Kolkata. These centres have available 40, 20 and 40 units
of his product. His retail outlets at A, B, C, D and E requires 25, Plants B 6 20 8 7 2 5 25
10, 20, 30 and 15 units of the product, respectively. The
shipping cost per unit (in rupees) between each centre and
outlet is given in the following table. C 4 5 2 10 5 5 7 20

Retail Outlets Demand 25 10 15 5 55

Distribution
Centre
A B C D E
Answer the following questions, giving brief reasons for the
Agra 55 30 40 50 40 same:
Allahabad 35 30 100 45 60 (a) Is this solution feasible?
(b) Is this solution degenerate?
Kolkata 40 60 95 35 30 (c) Is this solution optimum?
(d) Does this problem have more than one optimum solution?
Determine the optimal shipping cost.
If so, show all of them.
[Delhi Univ. MBA, 2003]
(e) If the cost for the route B-III is reduced from Rs 7 to Rs
8. A steel company is concerned with the problem of distributing
6 per unit, what will be the optimum solution?
imported ore from three ports to four steel mills. The supplies
11. A baking firm can produce a special bread in either of its two
of ore arriving at the ports are:
plants, the details of which are as follows:
Port Tonnes per week
a 20,000 Plant Production Capacity Production Cost
b 38,000 Loaves Rs/Loaf
c 16,000
The demand at the steel mills is as follows: A 2,500 2.30
Steel mills : A B C D B 2,100 2.50

Tonnes per week : 10,000 18,000 22,000 24,000

Four restaurant chains are willing to purchase this bread; their
The transportation cost is Re 0.05 per tonne per km. The demand and the prices they are willing to pay are as follows:
distance between the ports and the steel mills is as given below:

A B C D Chain Maximum Demand Price Offered

Loaves Rs/Loaf
a 50 60 100 50
1 1,800 3.90
b 80 40 70 50 2 2,300 3.70
3 0,550 4.00
c 90 70 30 50
4 1,750 3.60
280 Operations Research: Theory and Applications

The cost (in paise) of shipping a loaf from a plant to a restaurant Determine a delivery schedule for the baking firm that will
chain is: maximize its profit from this bread.
Write the dual of this transportation problem and use it for
Chain 1 Chain 2 Chain 3 Chain 4 checking the optimal solution to the given problem.
[Delhi Univ., MBA, 2005]
Plant A 6 8 11 9
Plant B 12 6 8 5

HINTS AND ANSWERS

1. The initial solution obtained by VAM is also the optimal 8. x11 = 10,000, x14 = 10,000, x22 = 18,000, x23 = 6,000,
solution: x11 = 50, x12 = 100, x21 = 150, x33 = 150, x24 = 14,000, x33 = 16,000, Total cost = Rs 1,66,000.
x42 = 100, x43 = 50. Maximum total tonnage = 3,300. 9. x11 = 3,500, x12 = 1,500, x22 = 2,500, x23 = 2,000, x24 = 1,500,
2. (A, b) = 5, (A, d ) = 13, (B, b) = 8, (B, c) = 12, (C, a ) = 15 x31 = 2,500, Total cost = Rs 39,500.
and (C, b) = 3, Total cost = Rs 301. 10. (a) The solution is feasible because it satisfies supply and
3. (I, B) = 45, (I, F ) = 15, (II, A) = 17, (II, D) = 18, demand constraints.
(III, A) = 5, (III, C) = 20 and (III, E) = 15, (b) The solution is non-degenerate because the number of
Total cost = Rs 290. occupied cells are equal to the required number of
4. (a) (A, F ) = 100, (B, F ) = 70, (B, I ) = 80, (C, E ) = 90, (m + n – 1) of occupied cells in the solution.
(C, G) = 50, (C, I ) = 40, (D, H ) = 210, (D, I ) = 70, (c) Solution is optimal.
Total cost = Rs 6,600. (d) The problem has alternative optimal solution because
(b) When transportation cost from A to G is reduced to 10, the opportunity cost for cell (B, III) is zero;
optimal schedule given in (a) remains unchanged. x11 = 10, x21 = 15, x23 = 5, x24 = 5, x31 = 10 and x32 = 10,
Total cost = Rs 235.
5. x11 = 15, x14 = 5, x22 = 19, x24 = 9, x33 = 13, x34 = 4, Total
(e) If cell (B, III) has a unit cost of 6, the opportunity cost
cost = Rs 209.
in this cell will be – 1 and, therefore, the given solution will
6. x11 = 5, x12 = 10, x13 = 20, x14 = 5, x21 = 20, x34 = 25, not be optimal. The new solution obtained will be:
x35 = 15, Total cost = Rs 3,650. x13 = 10, x21 = 15, x23 = 5, x24 = 5, x31 = 10, x32 = 10,
7. x12 = 2, x13 = 4, x15 = 2, x21 = 4, x31 = 1, x34 = 6, x35 = 1, Total cost = Rs 230.
Total cost = Rs 720.

9.6 VARIATIONS IN TRANSPORTATION PROBLEM

Some of the variations that often arise while solving a transportation problem are as follows.

9.6.1 Unbalanced Supply and Demand

For a feasible solution to exist, it is necessary that the total supply must equal the total demand. That is,
Total supply = Total demand
m n
Σ ai = Σ b j
A dummy source i =1 j =1
or destination is
added to balance But a situation may arise when the total available supply is not equal to the total demand [For proof see
transportation appendix]. The following two cases may arise:
problem where
demand is not equal (a) If the total supply exceeds the total demand, then an additional column (called a dummy demand centre)
to supply. can be added to the transportation table in order to absorb the excess supply. The unit transportation
cost for the cells in this column is set equal to zero because these represent product items that are
neither made nor sent.
(b) If the total demand exceeds the total supply, a dummy row (called a dummy supply centre) can be added
to the transportation table to account for the excess demand quality. The unit transportation cost in
such a case also, for the cells in the dummy row is set equal to zero.
Example 9.10 A company has received a contract to supply gravel to three new construction projects
located in towns A, B and C. The construction engineers have estimated that the required amounts of gravel
which will be needed at these construction projects are: