TRANSSHIPME

NT METHOD
Prepared by: Justine Louisse R. Agpalasin
TRANSSHIPMEN
T
Transshipment refers to the shipment of
goods/containers to an intermediate
destination before being taken to the final
destination. 

The objective is to minimize transportation

cost
 TRANSSHIPMENT

• Transshipment (sometimes also trans-
shipment or transhipment) means the unloading
of goods from one ship and its loading into
another to complete a journey to a further
destination, even when the cargo may have to
remain ashore some time before its onward
journey. But the term can also be applied more
generally to other transport modes, such as
freight transport by road or rail or air, or any
combination of them.

Source: https://www.mp.com.sg/shipping-from-us-to-indonesia/
TRANSSHIPMENT
Example:

Singapore Manila
South Africa (Durban Port)

Reasons for Transshipments:

• When there is no direct (or expensive) direct air, land, or sea link between
importer and exporter of goods.
• Underload (Maximize container load)
TRANSSHIPME
NT METHOD
TRANSSHIPMEN
T METHOD Check if the problem is
balanced or unbalanced
If unbalanced, add a
dummy column / row

Find the Optimal Basic

Find the Initial Feasible Solution (Stepping Stone
Solution (VAM, NWC or Method or MODI
LCM) (Modified distribution)
method
Transshipment problem can be
converted into a transportation
problem.
STEPS IN SOLVING A TRANSSHIPMENT
PROBLEM:

Step1. If necessary, add a dummy demand point (demand equal to the

problem’s excess supply) to balance the problem. Shipments to the dummy
and from a point to itself will cost zero.

Step2. Construct a transportation tableau as follows: A row in the tableau

will be needed for each supply point and transshipment point, and a column
will be needed for each demand point and transshipment point.
SAMPLE PROBLEM
(BALANCING A TRANSSHIPMENT PROBLEM)

• Example: Widgetco.
Two factories in Memphis and Denver, with supplies 150 per day, and 200 per day.
• Customers in Los Angeles and Boston, with a demand 130 per day each.
• Widgetco believes that it may be cheaper to first ship some widgets to New York or
Chicago and then ship them to their final destinations.
• The costs of shipping a widget are given. Widgetco wants to minimize the total cost of
shipping the required widgets to its customers.
SAMPLE PROBLEM (BALANCING A TRANSSHIPMENT
PROBLEM)

Shipping Costs for Transshipments TO ($)

FROM Memphis Denver N.Y. Chicago L.A Boston
Memphis 0 - 8 13 25 28
Denver - 0 15 12 26 25
N.Y. - - 0 6 16 17
Chicago - - 6 0 14 16
L.A - - - - 0 -
Boston - - - - - 0
 PROBLEM FORMULATION
N.Y. Chicago L.A Boston Dummy Supply
(TRANSFER 1) (TRANSFER 2) (CUSTOMER 1) (CUSTOMER 2)
Memphis 8 13 25 28 0 150
(FACTORY 1)

Denver 15 12 26 25 0 200
(FACTORY 2)
N.Y. 0 6 16 17 0 350
(TRANSFER 1)
Chicago 6 0 14 16 0 350
(TRANSFER 2)
Demand
350 350 130 130 90 350
 TOTAL DEMAND = 260
PROBLEM FORMULATION TOTAL SUPPLY = 350

N.Y. Chicago L.A Boston Dummy Supply

(TRANSFER 1) (TRANSFER 2) (CUSTOMER 1) (CUSTOMER 2)
Memphis 8 13 25 28 0 150
(FACTORY 1)

Denver 15 12 26 25 0 200
(FACTORY 2)
N.Y. 0 6 16 17 0 350
(TRANSFER 1)
Chicago 6 0 14 16 0 350
(TRANSFER 2)
Demand
350 350 130 130 90 350
SAMPLE PROBLEM-
TRANSSHIPMENT

A company has three factories X,Y,Z producing product P

and two warehouses to stock the goods are to be sent to
four market centers A, B, C, D when the demand arises.
The figure given shows the cost of transportation from
factories to warehouses and from warehouses to market
centers. Formulate a transportation matrix and solve the
problem for minimizing the total transportation cost.
 TRANSSHIPMENT MODEL
Available capacities in units MARKET CENTER Requirement in Units

WAREHOUSE A
FACTORY
150
8 80
20 8
X
100 10 W1 9
B 100
7
15
100 Y 14
10
7
____ 11 C
W2 70
350
10 12
Z
12
100
D ___
Network Representation 350
SAMPLE PROBLEM

W1 W2 A B C D AVAILABLE
X 20 10 18 17 21 22 150
Y 15 10 18 17 21 22 100
Z 10 12 18 19 17 24 100
W1 0 0 8 9 7 14 350
W2 0 0 8 7 11 12 350
REQUIREMENT 350 350 80 100 70 100 350
 To compute for the transportation
cost we need to find the Initial
Feasible solution (IFS) use the
Vogel’s Approximation Method
NWC
LCM
VAM
Vogel’s Approximation
Method
Steps:
1. For each row with an available supply &
each column with an unfilled demand,
calculate an opportunity/penalty cost by
subtracting the smallest entry from the
2nd smallest entry for minimization
problem.
2. Identify the row or column with largest
opportunity or penalty cost.
3. Allocate the maximum amount possible
to the available route with the lowest
cost.
 PHASE I : VOGEL’S APPROXIMATION
METHOD
INITIALFEASIBLE SOLUTION USING VAM

WAREHOUSE MARKET CENTERS

W1 W2 A B C D AVAILABLE ROW DIFFENRENCE
20 10 18 17 21 22 0 7 - - - - - - -
X 150
150
15 10 18 17 21 22 0 5 5 - - - - - -
FACTORY Y 100
100
10 12 18 19 17 24 0 2 2 2 2 2 2 - -
Z 100
100
0 0 8 9 7 14 280 0 0 0 0 0 0 0 8
W1 350
250 30 70 30 / 0
WAREHOUSE
0 0 8 7 11 12 250 / 150 0 0 0 0 0 0 0 8
W2 350
100 50 100 100 50 /0
REQUIREMENT 350 350 80 100 70 100 350
250 100 50 0 0 0
0 0 0
COLUMN DIFFERENCE 0 0 0 2 4 2
0 0 0 2 4 2
0 0 0 2 4 2
0 0 0 2 - 2
0 0 0 - - 2
0 0 0 - - -
0 0 0 - - -
- 0 0 - - -

TRANSPORTATION COST
= (10*150)+(10*100)+(10*100)+(0*250)+(8*30)+(7*70)+(0*100)+(8*50)+(7*100)+(12*100)

TC =P 6,530
VAM = P 6,530

m (sources of supply)
VOGEL’S n (demand destinations)

APPROXIMATI m+n–1

ON METHOD 5 + 6 - 1 = 10

Non- degenerate
 DEGENERACY

In a standard transportation problem with m sources of supply

and n demand destinations, the test of optimality of any
feasible solution requires allocations in m + n – 1 independent
cells. If the number of allocations is short of the required
number, then the solution is said to be degenerate.

Dictionary:
Degenerate means showing evidence of decline.
 We need to find the Optimal
Basic Solution by using Stepping
stone Method or MODI Method
 Steps:
1. Draw a closed path (or loop) from an unoccupied
cell. The right angle turn in this path is allowed only
at occupied cells and at the original unoccupied cell.

Stepping Mark (+) and (-) sign alternatively at each corner,

starting from the original unoccupied cell. 

stone 2. Add the transportation costs of each cell traced in

the closed path. This is called net cost change. 

method
3. Repeat this for all other unoccupied cells.

If all the net cost change are ≥0, an optimal solution has

been reached. Now stop this procedure. 2. If not then
select the unoccupied cell having the highest negative net
cost change and draw a closed path.
 4. Select minimum allocated value among all
negative position (-) on closed path 

5. Assign this value to selected unoccupied cell (So

Stepping
unoccupied cell becomes occupied cell). 

6. Add this value to the other occupied cells marked

stone with (+) sign. 

method
7. Subtract this value to the other occupied cells
marked with (-) sign.
Repeat Step-2 to step-4 until optimal solution is
obtained.

This procedure stops when all net cost change ≥0 for

unoccupied cells.
 STEPPING-STONE METHOD
OPTIMALBASIC SOLUTION USING STEPPING STONE

WAREHOUSE MARKET CENTERS XW1 20 - 10 + 0 - 8 + 8 - 0=10

W1 W2 A B C D AVAILABLE XA 18 - 10 + 0 - 8=0
20 10 18 17 21 22 XB 17 - 10 + 0 - 7=0
X 150
150 XC 21 - 10 + 0 - 8 + 8 - 7=4
15 10 18 17 21 22 XD 22 - 10 + 0 - 12=0
FACTORY Y 100
100 YW1 15 - 10 + 0 - 8 + 8 - 0=5
10 12 18 19 17 24 YA 18 - 10 + 0 - 8=0
Z 100
100 YB 17 - 10 + 0 - 7=0
0 0 8 9 7 14 YC 21 - 10 + 0 - 8 + 8 - 7=4
W1 350
250 30 70 ZA 22 - 10 + 0 - 12=0
WAREHOUSE
0 0 8 7 11 12 ZW2 12 - 10 + 0 - 8 + 8 - 0=2
W2 350
100 50 100 100 ZA 18 - 10 + 0 - 8=0
REQUIREMENT 350 350 80 100 70 100 350 ZB 19 - 10 + 0 - 8 + 8 - 7=2
ZC 17 - 10 + 0 - 7=0
TRANSPORTATION COST ZD 24 - 10 + 0 - 8 + 8 - 12=2
Unused cells W1W2 0 - 8 + 8 - 0=0
= (10*150)+(10*100)+(10*100)+(0*250)+(8*30)+(7*70)+(0*100)+(8*50)+(7*100)+(12*100)
20 W1B 9 - 8 + 8 - 7=2
TC =P 6,530 W1D 14 - 8 + 8 - 12=2
W2W1 0 - 8 + 8 - 0=0
W2C 11 - 8 + 8 - 7=4
 MODI METHOD
OPTIMALBASIC SOLUTION USING MODI METHOD

V1=0 V2=0 V3=8 V4=7 V5=7 V6=12

WAREHOUSE MARKET CENTERS cij =ui +vj Cell Evaluation
W1 W2 A B C D AVAILABLE 20-(10+0)=10
20 10 18 17 21 22 18-(10+8)=0
X 150
U1=10 150 17-(10+7)=0
15 10 18 17 21 22 21-(10+7)=4
FACTORY Y 100
U2=10 100 22-(10+12)=0
10 12 18 19 17 24 15-(10+0)=5
Z 100
U3=10 100 18-(10+8)=0
0 0 8 9 7 14 17-(10+7)=0
W1 350
U4=0 250 30 70 21-(10+7)=4
WAREHOUSE
0 0 8 7 11 12 22-(10+12)=0
W2 350
U5=0 100 50 100 100 12-(10+0)=2
REQUIREMENT 350 350 80 100 70 100 350 18-(10+8)=0
19-(10+7)=2
17-(10+7)=0
24-(10+12)=2
U5 0 0-(0+0)=0
V2 (Cij) XW2 - U5 0-0=0 TRANSPORTATION COST 9-(0+7)=2
U1 (Cij) XW -V2 10-0=10 14-(0+12)=2
= (10*150)+(10*100)+(10*100)+(0*250)+(8*30)+(7*70)+(0*100)+(8*50)+(7*100)+(12*100)
U2 (Cij) YW2 -V2 10-0=10 0-(0+0)=0
V3 (Cij) W2A -U5 8-0=8 TC =P 6,530 11-(0+7)=4
U4 (Cij) W1A -V3 0-0=0
V1 (Cij) W1 -U4 0-0=0
U3 (Cij) ZW1-V1 10-0=10
V5 (Cij) W1C -U4 7-0=7
V4 (Cij) W2A -U5 7-0=7
V6 (Cij) W2A -U5 12-0=12
TOTAL MINIMUM TRANSPORTATION
COST
WAREHOUSE MARKET CENTERS
W1 W2 A B C D AVAILABLE
20 10 18 17 21 22
X 150
150
15 10 18 17 21 22
FACTORY Y 100
100
10 12 18 19 17 24
Z 100
100
0 0 8 9 7 14
W1 350
250 30 70
WAREHOUSE
0 0 8 7 11 12
W2 350
100 50 100 100

REQUIREMENT 350 350 80 100 70 100 350

Conclusion:
Deliver:
 150 units from FACTORY X to W2 at P10
 100 units from FACTORY Y to W2 at P10
 100 units from FACTORY Z to W1 at P17
 250 units from W1, transfer 30 units to MARKET CENTER A at P8 & 70 units to MARKET CENTER C at P7
 100 units from W2, transfer 50 units to MARKET CENTER A at P8, transfer 100 units to MARKET CENTER B at P7 &
transfer 100 units to MARKET CENTER D at P12.
To minimize cost at P6,530
Thank you..