CHAPTER 3

TRANSPORTATION AND ASSIGNMENT PROBLEMS

3.1 Transportation problems

The transportation problem arises frequently in planning for the distribution of goods and
services from several supply locations to several demand locations. Usually the quantity
of goods available at each supply location (origin) is fixed or limited and there is a
specified amount needed (demand) at user location (destination). With a verity of
shipping routes and differing cost for the routes, the objective will be to determine how
many units should be shipped from each origin to each destination so that all destination
demands are satisfied and total transportation costs are minimized.

Therefore, it is necessary to have the following information to develop transportation

model these are:
 Supply quantity (capacity of each origin)
 Demand quantity of each destination
 Unit transportation cost from each origin to each destination
The transportation algorithm requires the assumptions that all goods be homogeneous so
that any origin is capable of supplying any destination and quantity shipped over any
route. We shall add one additional requirement that will simplify the problems the total
quantity available for shipment is equal to the total quantity demanded.

The first step of the transportation algorithm is to find an initial feasible solution or a
basic feasible solution using any one of the following techniques
a) The North – West corner method (NWCM) – In this method, the transportation
distribution will start from the North – West corner and go horizontally, vertically
or diagonally which will be dependent on the demand and supply until all units
are allocated.
b) The least cost method (LCM) – This method tries to minimize the total
transportation cost by starting from the smallest unit cost then going to the next
least cost until all units are allocated.

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 c) Vogel’s approximation method (VAM) – This is very similar to the least cost
method but it wants to minimize the penalty of not taking the least cost by
calculating the difference between the two least costs in each row and each
column and then selecting the highest penalty.
After finding an initial feasible solution, the next step will be to evaluate a solution
whether it is optimal or not. If it is optimal, we will stop there; if not, we improve it until
we reach the optimal point. This is done using two techniques.
a) The stepping stone method (SSM) and
b) The modified distribution (MODI) method

The stepping stone method involves a good deal more effort than the MODI method as
you will note. However it provides an intuitive understanding of the evaluation process.
Moreover, when a solution is not optimal, the distribution plan must be revised by
reallocating units into and out of various cells and only the stepping stone method can be
used for the reallocation. It is therefore necessary to be able to use the MODI method and
then, the stepping stone method, if necessary.

Example
A firm owns facilities at six places. It has manufacturing plants at places A, B and C with daily
production of 50, 40 & 60 units, respectively. At point D, E and F, it has three warehouses with
daily demands of 20, 95 and 35 units, respectively. Per unit shipping costs are given in the
following table. If the firm wants to minimize its total transportation cost, how it should route its
products?

Warehouse
Plant D E F
A 6 4 1
B 3 8 7
C 4 4 2
Steps
1. Obtain an initial feasible solution using any of the three techniques.
2. Check whether it is optimal or not using the stepping stone or the MODI method.
3. If not optimal revise the solution until it is optimal

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 Initial feasible solution

a) North-West corner method (NWCM)

Warehouse supply

Plant D E F

6 A4 20 1
30 50
3 B 8 7
40 40

4 C4 2
25 35 60

Demand 20 95 35 150

TC = 6x20 + 4x30 + 8x40 + 4x25 + 2x35

TC = 730 birr

b) Least cost method (LCM)

Least cost method rule

1. select the cell with the lowest unit transportation cost
2. Assign the maximum amount to this cell that is allowable based on the
requirements (demand) and the capacity (supply) constraints
3. Cross out the row or column with exhausted capacity
4. Repeat step 1 to 3 until all assignments are made

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 Warehouse supply

Plant D E F

6 A4 1
15 35 50
3 B 8
20 7
20 40

4 C4 2
60 60

Demand 20 95 35 150

TC = 4x15 + 1x35 + 3x20 + 8x20 + 4x60

TC = 555 birr
Finding an optimal solution
The test for optimality for a feasible solution involves a cost evaluation of empty cells
(i.e. routes to which number of units have been allocated) to see if an improved solution
is possible.
A|) Stepping stone method - Evaluation Using the Stepping Stone method

The stepping stone method involves tracing a series of closed paths in the transportation
table, using one such path for each empty cell. The path represents a shift of one unit in to
an empty cell, and it enables the manger or analyst to answer what if question; what
impact on total cost would there be if one unit were shifted in to a cell. If the shift would
result in a cost savings, the stepping stone path also can be sued to determine the
maximum number of units that can be shifted in to the empty cells, as well as
modifications to other completed cells needed to compensate for the shift in to the
previously unused cell.

The name stepping-stone relates to an analogy of crossing a pond or stream by moving

from stone to stone; in the case of a transportation solution the stone are the completed
cells.

Rules for tracing Stepping - Stone path

1. All unoccupied cells must be evaluated, Evaluate cells one at a time
2. Except for the cell being evaluated, only add or subtract in occupied cells (It is

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 permissible to skip over occupied cells to find an occupied cell from which the
path can continue).
3. A path will consist of only horizontal and vertical moves, starting and ending with
the empty cell that is being evaluated.
4. Alternate “+” and “-” signs, beginning with a “+” sign in the cell being
evaluated.

Note that it is not necessary to actually alter the quantities in the various cells to reflect
the one unit change, the “+” and “-”signs suffice. The general implication of the plus and
minus signs is that cells with “+” signs mean one unit would be added. Cells with a “-”
sign indicate one unit would be subtracted. The net impact of such a one unit shift can be
determined by adding the cell costs with signs attached and noting the resulting value.

 Consider the initial feasible solution obtained by using NWCM

Warehouse supply

Plant D E F

6 A4 20 1
30 50
3 B 8 7
40 40

4 C4 2
25 35 60

Demand 20 95 35 150

Evaluate the opportunity cost of each empty cell.

Empty cell Closed loop Net cost change
AF AF-CF-CE-AE +1-2+4-4 = -1
BF BF-CF-CE-BE +7-2+4-8 =+1
BD BD-AD-AE-BE +3-6+4-8=-7
CD CD-AD-AE-CE +4-6+4-4 =-2

If we take cell BD, cost can decrease by birr 7per unit

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Improved solution

Warehouse supply

Plant D E F

6 A4 1
50 50
3 B 8
20 7
20 40

4 C4 2
25 35 60

Demand 20 95 35 150
TC = 4x50 + 3x20 + 8x20 + 4x25 + 2x35
TC = 590 birr
2nd evaluation

Empty cell closed 100P Net cost change

AD AD – AE –BE – BD +6-4+8-3 = +7
AF AF-CF-CE-BE +1-2+4-4 = -1
BE BF-CF-CE-BE +7-2+4-8 =+1
CD CD-BD-BE-CE +4-3+8-4 = +5

Take cell AF and improve the solution

Improved solution
Warehouse supply Cheek
AD = +6-4+8-3 = +7
Plant D E F BF = +7-8+4-1 =+2
CD = +4-3+8-4 =+5
A6 4 1
CF=+2-4+4-1 =+1
15 35 50 This is optimal solution
B3 20 8
20 7
40

C4 4 60 2
60

Demand 20 95 35 150
TC = 4x15 + 1x35 + 3x20 + 8x20 + 4x60

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 TC = 555 birr This is final
b) The modified distribution method (MODI) - Evaluation using the MODI method

The MODI (modified distribution) methods of evaluation a transportation solution for

optimality involves the use of index numbers that are established for the rows and
columns. These are based on the unit costs of the occupied cells. The index numbers can
be used to obtain the cell evaluations for empty cells with out the use of stepping-stone
paths. There is one index number for each column and one for each row. These can be
conveniently displayed along the top and right edges of a matrix. The matrix numbers are
determined in such a way that for any occupied cells, the sum of the row index and the
column index equals to the cells unit transportation cost.
Row index + Column index = Cell cost
r1 + k1 = Cij
The index numbers are determined sequentially in a manner indicated by the position of
occupied cells. The process always begins by assigning a value of zero as the index
number of row 1. This method will be illustrated by developing index numbers for the
initial feasible solution for the above problem generated by the north - west corner
method which is repeated below.

We begin by assigning a value of zero as the index for row 1. Once row index has been
established, it will enable us to compute column index numbers for all occupied cells in
that row. Similarly once a column index number has been determined, index numbers for
all rows corresponding to occupied cells in that column can be determined.

Initial solution
C1= 6 C2=4 C3=2

Warehouse supply

Plant D E F

6 r1=0 A 4 20 1 30 50

3 r2= 4 B 8 7 40 40

4
r3 = 0 C 4 2
25 35 60
Demand 20 95 35 150

ri + ci = Cost of occupied cell

r1 =0 (always)
r1 + c1 = 6 r3 + c2 = 4
D + c1 = 6 r3 + 4 = 4
C1 = 6 r3 = 0
C2 = 4
r2 + c2 = 8 r3 + c3 = 2
r2 + 4 = 8 0 + c3 = 2
r2 = 4 c3 = 2
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Evaluation
We can now readily determine the cell evaluations (improvement potentials) for each of
the unoccupied cells in any order by using the following simple formula:

Cell evaluation = cell Cost - Row index- column index

AF = 1 – 0 – 2 = - 1
BD = 3 – 4 – 6 = - 7
BF = 7 – 4 – 2 = + 1
CD = 4 – 0 – 6 = - 2
Select cell BD since it reduces cost to a larger extent (by birr 7 per unit)
Improved solution
Warehouse supply

Plant D E F

6 A4 1
50 50
3 B 8
20 7
20 40

4 C4 2
25 35 60

Demand 20 95 35 150
TC= Birr 590
R1 = 0 Evaluation
C2 = 4 AD = 6-0-4 = + 2
R2 = 4 AF = 1- 0 – 4 = -1
C1 = -1 BF = 7 – 4 – 2 = +1
R3 = 0 CD = 4 – 0 – (-1) =5

Select cell AF

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Improved solution

Warehouse supply

Plant D E F

6 A4 1
15 35 50
3 B 8
20 7
20 40

4 C4 2
60 60

Demand 20 95 35 150

TC = Birr 555

Distribution plan
Route (From to ) Quantity Cost
Plant A ----- Warehouse E 15 Birr 60
Plant A ----- Warehouse F 35 Birr 35
Plant B ----- Warehouse D 20 Birr 60
Plant B ----- Warehouse E 20 Birr 160
Plant C ------ Warehouse E 60 Birr 240
Total Cost = Birr 555

Some special issues in transportation problem (Reading Assignment)

1. Unbalanced demand and supply
The transportation problems we discussed earlier were having the same aggregate
demand and supply. However situations may arise when the two are unequal.
When the aggregate supply exceeds the aggregate demand, the excess supply is assumed
to go to inventory and costs nothing for shipping. A column of dummy is added and
transportation cost is zero. When the aggregate demand exceeds the aggregate supply,
demand for some of the destinations will not be satisfied and no transportation cost is
incurred. As a result, a dummy row is added with zero transportation cost.

Example

Given the following transportation problem, determine the best transportation schedule

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 D1 D2 D3 Supply
Q1 1 3 4 200
Q2 2 6 8 500
Q3 2 5 7 300
Demand 200 100 400

After we add dummy row or dummy column, we will use the same procedure for finding an
initial feasible solution or for evaluating it for optimality.

Demand supply

Plant D1 D2 D3 D4 (Dummy)

1 Q1 200
3 4 0
200
2 Q2 6 8 0
200 300 500

2 Q3 5 7
100 0
200 300

Demand 200 100 400 300

Least cost method

TC = 200x1 + 8x200 + 0x300 + 5x100 + 7x200

= 3700 birr
Use the same procedure for checking for optimality
2. Prohibited routes
Sometimes some transportation routes may not be available. This could be due to a
variety of reasons like unfavorable weather conditions, strike on a particular route, road
construction, etc. To handle such routes, we assign a very large cost represented by M to
each of such prohibited routes and make them out of consideration.
Example

Find a solution for the following transportation problem

A B C Supply
X 4 10 6 100
Y 8 16 6 300
Z 14 18 18 10 300
Demand 200 300 200 700

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 Because of road construction the Y-C route is now closed. Solve the problem.

LCM

Demand supply

Plant A B C

4 X 10
100 6
100
8 Y 16
100 M
200 300
14
Z 18 10

100 200 300

Demand 200 300 200 150

TC= 100(4)+100(8)+200(16)+100(18)+200(10)=Birr 6400 (Note-- Make M out
of consideration in the assignment -- and continue the same)

3. Multiple optimal solutions

When we evaluate a solution for optimality, in order to be optimal all evaluations
must give a positive result. However, if we find a zero evaluation result, we can
conclude that there is an alternate optimal solution.
Example
Solve the following transportation problem
A company has three plants and four warehouses. The supply and demand in units and
the corresponding transportation costs are given. Also the final solution is given below.

Demand supply

Plant D1 D2 D3 D4

5 A 10
4
105 10
6 B 208 7 2
5 25

4 C 52 105 57 20

Demand 25 10 15 5 55

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 TC = BIRR 235
Does the problem have an alternate optimal solution? Identify. Let’s evaluate it with
MODI method
r1 = 0 AD1 = 5 – 0 – 3 = 2
k3 = 4 AD2 = 4 – 0 – 1 = 3
r3 = 1 AD4 = 5 – 0 – (-1) = 6
k2 = 1 BD2 = 8 – 3 – 1 = 4
r2 = 3 BD3 = 7 – 3 - 4 = 0 *
k4 = -1 CD4 = 7 – 1 – (-1) = 7
Since there is no negative evaluation result, we can conclude that this is an optimal
solution. But the net evaluation result of cell BD3 is 0 which indicates the existence of an
optimal solution. Let’s improve the solution by using cell BD3.
Improved solution

Demand supply

Plant D1 D2 D3 D4

5 A 10
4 5
10 10
6 B 158 7
52 5 25

4 C 102 105 7
20

Demand 25 10 15 5 55
TC= BIRR 235. It gives the same total cost

4. Degeneracy
We have seen that a basic feasible solution of a transportation problem must have an
Error: Reference source not found number of occupied cells where, m represents the
number of rows and n represents the number of columns. A solution is degenerate if the
number of occupied cells is less than Error: Reference source not found. If it is
degenerate, it is impossible to evaluate using both the stepping stone and MODI method.

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 Example
Solve the following transportation problem
NWCM

Demand supply

Plant D1 D2 D3 D4

7 A 203 408 6
60
4 B 2
105
1

50
0
40 100

2 C 5 6 1
40 40

Demand 20 50 50 80 200
TC = Birr 970

Is the solution degenerate? No b/c 3+4 - 1 = 6 = 6

Revise the solution using MODI method.

r1 = 0 k3 = 6 AD3 = 8 – 0 – 6 = 2
k1 = 7 k4 = 11 AD4 = 6 – 0 – 11 = -5
k2 = 3 r3 = -10 BD1 = 4 – (-1) – 7 = - 2
r2 = -1 CD1 = 2 – (-10) – 7 = 5
CD2 = 5 – (-10) – 3 = 12
CD3 = 6 – (-10) – 6 = 10

Demand supply

Plant k1= 7 D1 k2= 3 D2 k3=6 D3 k4=11 D4

r1=0
7 A 203 408
6
+2 +2 60

r2=-1
4 B -42 105
1

50
0
40 100

r3=-10
2 C +55 6
+12 1
+7 40 40

Demand 20 50 50 80 200

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 5. Maximization problems

A transportation tableau may contain unit profits instead of unit costs and the objective
function may be maximization of profits instead of minimization of costs. First we
change to opportunity cost table and apply the same procedure.

Example
Solve the following transportation problem given unit profits from each source to each
destination.
A B C D Supply
X 12 18 6 25 200
Y 8 7 10 18 500
Z 14 3 11 20 300
Demand 180 320 100 400 1000
Identify the largest per unit profit and subtract all values from it.

Opportunity cost table

A B C D Supply
A 13 7 19 0 200
B 17 18 15 7 500
C 11 22 14 5 300
Demand 180 320 100 400 1000

Exercises:

1. Consider the following transportation problem

To
From Store - 1 Store 2 Store 3 Supply
Warehouse A 12 20 15 50
Warehouse B 9 11 4 15
Warehouse C 20 14 8 55
Demand 25 50 45 120

a. Develop an initial feasible solution using the North West comer method, compute the
total cost for this solutions.
b. Evaluate the solution using the stepping stone method. Is the solution optimal?
Explain
c. Repeat the evaluation using MODI and compare your cell evaluations to those

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 obtained using the stepping stone method.
d. Obtain an improved solution and evaluate it using MODI. Is it optimal?
e. What is the total cost for your optimal solution?

2. The Microsoft enterprise manufactures the central processing unit (CPU) for a line of
personal computers. The CPUs are manufactured in Seatle, Columbus, and Newyork,
and shipped to warehouses in pitsbugh, mobile, Denver, Los Angeles and Washington
DC for further distribution. The transportation table below shows the number of CPUs
available at each plant and the number of CPUs required by each warehouse. The
shipment costs are also shown below.
Pittsburgh Mobile Denver Los Washington SS
Angeles
Seattle 10 20 5 9 10 9000
Columbus 2 10 8 30 6 4000
New York 1 20 7 10 4 8000
DD 3000 5000 4000 6000 3000 21000
Ware hose
a. Determine the amount that should be shipped from each plant to each warehouse in
order to minimize the total shipping cost.
b. The pits burgh ware house has just increased its order by 1000 units and Microsoft
has authorized the Columbus plant to increase productivity by 1000 units, do you
expect this development to lead to an increase or a decrease in total shipping costs?
Solve for the new optimal solution.

3.2. Assignment problems

Assignment is a problem because people possess varying, abilities for performing different jobs
and therefore, the costs or profits of performing different jobs by different people will be quite
different.

The Hungarian Assignment Method (HAM)

Steps
1. Row reduction: Locate the smallest element in each row of the cost table and subtract
this element from each element in that raw.
2. Column reduction: In the reduced cost table obtained, locate the smallest element in
each column and subtract this element from each element in that column.
3. Covering lines: Draw the minimum possible number of horizontal and vertical lines that
are required to cover all zero elements.
4. Optimality check: If the minimum number of lines is equal to the number of rows or

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 columns, it is optimal. If not, select the smallest uncovered element; subtract this element
from all uncovered elements and add this element to each value located at the intersection
of any two lines. The cost elements through w/c only one line passes remain unchanged.
5. Repeat steps 3 and 4 until the number of covering lines is equal to the number of rows or
columns.
6. Make the assignments as indicated by the zero elements.

Example
A production supervisor is considering how he should assign the five jobs that are to be
performed to the five workers under him such that the aggregate time in days to complete
all the jobs is the least. Based on previous experience, he has the information on the time
taken by the five workers as given below.
Job

Worker A B C D E Min no.

1 10 3 3 2 8 2
2 9 7 8 2 7 2
3 7 5 6 2 4 2
4 3 5 8 2 4 2
5 9 10 9 6 10 6
Step 1: row reduction

A B C D E
1 8 1 1 0 6
2 7 5 6 0 5
3 5 3 4 0 2
4 1 3 6 0 2
5 3 4 3 0 4
min 1 1 1 0 2
Step 2: Column reduction

A B C D E
1 7 0 0 0 4
2 6 4 5 0 3
3 4 4 3 0 0

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 4 0 2 5 0 0
5 2 3 2 0 2

Step 3: Minimum number of covering lines

A B C D E

1 7 0 0 0 4
2 6 4 5 0 3
3 4 2 3 0 0
4 0 2 5 0 0
5 2 3 2 0 2
Number of covering lines < number of rows/ columns which indicate that the solution is

not optimal.

- The smallest uncovered value is 2

- Subtract 2 from all uncovered values and add it to the intersection of any two

lines.

A B C D E

1 7 0 0 2 6
2 4 2 3 0 3
3 2 0 1 0 0
4 0 2 5 2 2
5 0 1 0 0 2

No of lines = no of rows /columns = 5  optimal

Assignment

A B C D E

1 7 0 0 2 6

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 0 2 4 2 3 0 3
3 2 0 1 0
0
4 2 5 2 2
0
5 0 1 0 2
0

The assignment will be

Worker Job Time

1 B 3
2 D 2
3 E 4
4 A 3
5 C 9

Minimum time = 21 days

Special Issues in assignment problem (Reading Assignment)

1. Unbalanced Assignment Problems

The Hungarian assignment method requires that the number of rows should be equal to
the number of columns. But sometimes unbalanced problems Error: Reference source not
found may exist. If the number of rows is more than the number of columns, dummy
column will be added with costs of zero and when the number of columns is more than
the number of rows, a dummy row will be added with costs of zero.

2. Prohibited Assignment Problems

It happens sometimes that a worker cannot perform a certain job because of any reason.
To handle such problems, the cost of performing that job by such person is taken to be
extremely large which will be written as M.

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 Example
You are given the following information about the cost of performing different jobs by
different persons. Also you are given that person 1 cannot be assigned to job 3 and person
3 cannot be assigned to job 4.
Job

J1 J2 J3 J4 J5

P1 27 18 16 20 21

Person P2 31 24 21 12 17
P3 20 17 20 21 16
P4 22 28 20 16 27
Because this is the case of unbalanced and a prohibited assignment problem, we have
to first balance and handle the prohibited assignment as follows.

J1 J2 J3 J4 J5 row minimum
P1 27 18 M 20 21 18
P2 31 24 21 12 17 12
P3 20 17 20 M 16 16
P4 22 28 20 16 27 16
Dummy 0 0 0 0 0 0
Row reduction

A B C D E
P1 9 0 M 2 3
P2 19 12 9 0 5
P3 4 1 4 M 0
P4 6 12 4 0 11
dummy 0 0 0 0 0
Column 0 0 0 0 0

minimum
Column reduction

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 A B C D E

P1 9 0 M 2 3
P2 19 12 9 0 5
P3 4 1 4 M 0
P4 6 12 4 0 11
dummy 0 0 0 0 0

This is not optimal because the number of covering lines is less than the number of

rows and columns.

Smallest uncovered number = 4

J1 J2 J3 J4 J5

P1 9 0 M 6 3
P2 15 8 5 0 1
P3 4 1 4 M 0
P4 2 8 0 0 7
dummy 0 0 0 4 0

No. of lines = 5  optimal

Assignment

A B C D E
1 9 M 6 3
0
02 15 8 5 0 1

03 4 1 4 M
4 2 8 0 7
0
5 0 0 4 0
0
P1 J2 = 18
P2 J4 = 12
P3 J5 = 16

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 P4 J3 = 20
Min cost = 66
J1 will remain unassigned

3. Multiple optimal solutions

Sometimes we may find a tie in assigning as there may be no row or column which has
only one zero. If this happens, we can conclude that there are multiple/alternate optimal
solutions and we can take any of the zeros and assign.
Example
Solve the following assignment problem and obtain the minimum cost at which all the
jobs can be performed.
1 2 3 4 5
A 25 18 32 20 21
B 34 24 21 12 17
C 20 17 20 32 16
D 20 28 20 16 27

The optimal solution is

1 2 3 4 5

A 7 14 6 3
0
0 B 18 9 5 0 1
C 4 1 4 20
0
D 8 0 0 7
0
dummy 0 0 4 0
0
Alternative 1 Alternative 2
A 2 = 18
B4 = 12 A  2 = 18
C5 = 16 B  4 = 12
D1 = 20 C  5 = 16
E3 =0 D  3 = 20
Total = 66 E1 = 0
Total = 66

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 3. Maximization problems
As you have seen earlier, the objective of an assignment problem is minimization in most
of the cases. But sometimes the objective may be maximization instead of minimization
if unit profits are given.
Example
A company plans to assign 5 salesmen to 5 districts in w/c it operates. Estimates of sales
revenue in birr for each salesman in d/t districts are given as follows. Determine the
optimum assignment which maximizes the total sales revenue.

D1 D2 D3 D4 D5
S1 40 46 48 36 48
S2 48 32 36 29 44
S3 49 35 41 38 45
S4 30 46 49 44 44
S5 37 41 48 43 47
As we have done in the case of transportation problems, we will identify the largest

unit profit (49 in this case) and subtract all unit profits from the largest one so that it

will be changed to opportunity cost table.

Opportunity loss matrix

D1 D2 D3 D4 D5
S1 9 3 1 13 1
S2 1 17 13 20 5
S3 0 14 8 11 4
S4 19 3 0 5 5
S5 12 8 1 6 47
After this we will follows the same procedure for assignment.

Answer -- Maximum sale = 231

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