DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

Session 05
The Transportation Problem

Content
Aim
Learning Outcomes
Introduction
5.1 The Theory of Transportation Problem
5.2 Setting up a Transportation Problem
5.3 Developing an Initial Feasible Solution
5.4 Optimal Solution
5.5 Stepping Stone Method
5.6 Degeneracy
Summary

Aim
This session is for giving students knowledge about the theory and application
of transportation method in capacity management

Learning Outcomes
At the end of this session, you should be able to,
i) Set up the transportation problem
ii) Find the initial feasible solution
iii) Use stepping stone method to find optimum solution

Introduction
There is a type of linear programming problem that may be solved using a
simplified version of the simplex technique called transportation method.
Because of its major application in solving problems involving several
product sources and several destinations of products, this type of problem is
frequently called the transportation problem. It gets its name from its
application to problems involving transporting products from several sources
to several destinations. Although this formation can be used to represent more
general assignment and scheduling problems as well as transportation and
distribution problems. The two common objectives of such problems are
either minimize the cost of shipping m units to n destinations or maximize the
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DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

profit of shipping m units to n destinations. Each shipping source (factory)

has a certain capacity and each destination (warehouse) has certain
requirements with a given cost of shipping from the source to the destination.

5.1 The Theory of Transportation Problem

Let us assume there are m sources supplying n destinations. Source capacities,
destinations requirements and costs of material shipping from each source to
each destination are given constantly. The transportation problem can be
described using following linear programming mathematical model and
usually it appears in a transportation table.
Mathematical Model of a Transportation Problem
Given below is the linear programming mathematical model for
transportation problem.

where
m … number of sources
n … number of destinations
ai … capacity of i-th source (in tons, pounds, litres, etc)
bj … demand of j-th destination (in tons, pounds, litres, etc.)
cij … cost coefficients of material shipping (unit shipping cost)
between i-th source and j-th destination (in Rs. or as a
distance in kilometres, miles, etc.)
xij … amount of material shipped between i-th source and j-th
destination (in tons, pounds, litres etc.)

Transportation Table
The transportation table, where supply availability at each source is shown in
the far right column and the destination requirements are shown in the bottom
row. Each cell represents one route. The unit shipping cost is shown in the
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DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

upper right corner of the cell, the amount of shipped material is shown in the
centre of the cell.

Table 5.1: Transportation Table

To
Destination Source
D1 D2 ..Dj.. Dn
Supply
From Source
c11 c12 c1n
S1 a1
x11 x12 x1n
c21 c22 c2n
S2 a2
x21 x22 x2n
cij
..Si ai
xij
cm1 cm2 cmn
Sm am
xm1 xm2 xmn
Destination ∑ai
b1 b2 ..bj.. bm
Requirements ∑bj

Where,
m … number of sources
n … number of destinations
ai … capacity of i-th source (in tons, pounds, litres, etc)
bj … demand of j-th destination (in tons, pounds, litres, etc.)
cij … unit material shipping cost between i-th source and j-th
destination (in Rs. or as a
distance in
kilometres, miles, etc.)
xij … amount of material shipped between i-th source and j-th
destination (in tons, pounds, litres etc.)

5.2 Setting up a Transportation Problem

Let us first look at how to set up a transportation problem. We will look at it
in the context of a simple example. Let us suppose that a company has four
factories supplying four warehouses and its management wants to determine
the minimum-cost shipping schedule for its weekly output of chests.

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DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

Factory supply, warehouse demands, and shipping costs per one chest (unit)
are shown in Table 5.2
Shipping Cost per Unit
(in Rupees)
Factory Supply Warehouse Demand From To To To To
E F G H
A 14 E 10 A 10 30 25 15
B 10 F 15 B 20 15 20 10
C 15 G 12 C 10 30 20 20
D 12 H 15 D 30 40 35 45

Table 5.2: Data for Transportation Problem

At first, it is necessary to prepare an initial feasible solution, which may be
done in several different ways; the only requirement is that the destination
needs be met within the constraints of source supply.
The first step at this point is setting up a transportation table or a
transportation matrix. Its purpose is to summarise conveniently and concisely
all relevant data and to keep track of algorithm computations.
The transportation matrix for this example appears in Table 5.3, where supply
availability at each factory is shown in the far right column and the warehouse
demands are shown in the bottom row.

To Factory
E F G H
From Supply
10 30 25 15
A 14

20 15 20 10
B 10

10 30 20 20
C 15

30 40 35 45
D 12

0 0 0 0
Dummy 1

Destination 52
10 15 12 15
Requirements 52
Table 5.3: Transportation Matrix for the given Problem

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DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

The unit shipping costs are shown in the small boxes within the cells. It is
important at this step to make sure that the total supply availabilities and total
demand requirements are equal. Often there is an excess supply or demand.
In such situations, for the transportation method to work, a dummy warehouse
or factory must be added. Procedurally, this involves inserting an extra row
(for an additional factory) or an extra column (for an additional warehouse).
The amount of supply or demand required by the dummy equals the
difference between the row and column totals.
In this case the total supply and demand are:
Total factory supply … 51
Total warehouse requirements … 52
Thus we see here the warehouse requirement is higher that the supply. This
involves inserting an extra row - an additional factory. The amount of supply
by the dummy equals the difference between the row and column totals. In
this case there is 52 – 51 = 1.
The cost figures in each cell of the dummy row would be set at zero so any
units sent there would not incur a transportation cost. Theoretically, this
adjustment is equivalent to the simplex procedure of inserting a slack variable
in a constraint inequality to convert it to an equation, and, as in the simplex,
the cost of the dummy would be zero in the objective function.

Activity 5.1: Setting-up a Transportation Problem

Auto Lanka transporters is a vehicle hiring company which on a particular

day has lorries at the following towns in quantities indicated.
Silk City 35 Cotton Field 60 Gem Town 25
On the following day the following towns will need lorries as follows:
Rubberwatta 30 Teagama 45 Coconutpura 25
Fishtown 20

The distance between the towns are given below

To
From Rubberwatta Teagama Coconutpura Fishtown
Silk City 50 30 60 70
Cotton Field 20 80 10 90
Gem Town 100 40 80 30

Based on the information given set-up a transportation matrix that will help
Auto Lanka transporters to send the lorries to the desired locations with
minimum driving time. Assume the driving time between the town per unit
length is identical.

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 DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

5.3 Developing an Initial Feasible Solution

Initial allocation entails assigning numbers to cells to satisfy supply and
demand constraints. There are several methods by which this can be done.
a) The North-West Corner method
b) The Least Count method
c) Vogel’s Approximation method (VAM)
North West Corner Method of Allocation
The northwest-comer method, as the name implies, begins allocation by
starting at the northwest comer of the matrix (Cell S1D1) and assigning as
much as possible to each cell in the first row. Assign as many units as possible
to each cell to meet the requirements of having no more than m +n – 1 filled
cells, where m = number of rows and n = number of columns. The procedure
is then repeated for the second row, third row, and so on, until all row and
column requirements are met.
Table 5.4 shows a northwest-corner assignment.
Here Cell AE was assigned first, AF second, BF third, and so forth. The total
cost according to this assignment would be:
(10x10) + (30x4) + (15x10) + (30x1) + (20x12) + (20x2) + (45x12) + (0x1)
= Rs.1220.00
Inspection of Table 5.4 indicates some high-cost cells were assigned and
some low-cost cells bypassed by using the northwest-comer method. Indeed,
this is to be expected since this method ignores costs in favour of following
an easily programmable allocation algorithm.
To Factory
E F G H
From Supply
10 30 25 15
A 14
10 04
20 15 20 10
B 10
10
10 30 20 20
C 15
01 12 02
30 40 35 45
D 12
12
0 0 0 0
Dummy 1
01
Destination 52
10 15 12 15
Requirements 52
Table 5.4: North West Corner Assignment

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Least-Cost Method of Allocation

This method allocates as much as possible to the least-cost cell. Ties may be
broken arbitrarily. Rows and columns that have been completely allocated are
not considered, and the process of allocation is continued. The procedure is
completed when all row and column requirements are addressed.
Table 5.5 shows a least-cost assignment.

To Factory
E F G H
From Supply
10 30 25 15
A 14
03 06 05
20 15 20 10
B 10
10
10 30 20 20
C 15
09 06
30 40 35 45
D 12
12
0 0 0 0
Dummy 1
01
Destination 52
10 15 12 15
Requirements 52
Table 5.5: Least Cost Assignment

In this process, Cell Dummy-E was assigned first, CE second, BH third, AH

fourth, and so on. The total cost according to this assignment would be (30x3)
+ (25x6) + (15x5) + (10x10) + (10x9) + (20x6) + (40x12) + (0x1)
= Rupees 1105.00
Vogel's Approximation Method of Allocation
This method also takes costs into account in allocation. Six steps are involved
in applying this heuristic. The Vogel's approximation method (VAM) usually
produces an optimal or near- optimal starting solution. Given below are the
steps involved.
• Step 1:
For each row and column of the transportation table, find the difference
between the two lowest unit shipping cost. These numbers represent the
difference between cost and the best route in the row or column and the
second-best route in the row or column. For the example we have been
discussing this is shown in Table 5.6.

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 DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

10 15 20 10
To Factory
E F G H
From Supply
10 30 25 15
A 14 05

20 15 20 10
B 10 05

10 30 20 20
C 15 10

30 40 35 45
D 12 05

0 0 0 0
Dummy (Y) 01 00

Destination 52
10 15 12 15
Requirements 52
Table 5.6: Transportation Table with VAM row and column differences
shown.
• Step 2:
Identify the row or column with the largest difference. In case of Table 5.6 it
is Column G, with a difference of 20.
• Step 3:
Allocate as much as possible to the lowest-cost cell in the row or column with
the highest difference. If two or more differences are equal, allocate as much
as possible to the lowest-cost cell in these rows or columns.
In the example in Column G the lowest-cost cell is YG. The maximum that
can be allocated to this cell is 1 piece. This is indicated in Table 5.7.
• Step 4:
Eliminate any row or column that has been just completely satisfied by the
assignment just made. This can done by placing ‘X’ in each appropriate
square. This is indicated in Figure 5.8. Where cells YE, YF and YH are placed
with X sign to indicate no further allocations could be done in this row.
• Step 5:
Recalculate the differences between the two lowest cells remaining in all rows
and columns. Any row and column with zero supply or demand should not be
used in calculating further differences.
For the example for the problem we have been discussing this is shown in
Table 5.9. Here the values of Columns E, G and H have changed. Row Y is
eliminated and the values for other rows and columns remain unchanged.

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 DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

10 15 20 10
To Factory
E F G H
From Supply
10 30 25 15
A 14 05

20 15 20 10
B 10 05

10 30 20 20
C 15 10

30 40 35 45
D 12 05

0 0 0 0
Dummy (Y) 01 00
01
Destination 52
10 15 12 15
Requirements 52
Table 5.7: Transportation Table with VAM row and column differences
shown and after the First allocation to cell YG
10 15 20 10
To Factory
E F G H
From Supply
10 30 25 15
A 14 05

20 15 20 10
B 10 05

10 30 20 20
C 15 10

30 40 35 45
D 12 05

0 0 0 0
Dummy 01 00
X X 01 X
Destination 52
10 15 12 15
Requirements 52
Table 5.8: Transportation Table with VAM row and column differences
shown and after the First allocation to cell BF and eliminating the
rows/columns that have completely satisfied the quota.

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 DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

10 0 15 15 20 0 10 05
To Factory
E F G H
From Supply
10 30 25 15
A 14 05 05

20 15 20 10
B 10 05 05

10 30 20 20
C 15 10 10

30 40 35 45
D 12 05 05

0 0 0 0
Dummy (Y) 01 00
X X 01 X
Destination 52
10 15 12 15
Requirements 52
Table 5.9: Second VAM Assignment with Row B’s Requirements
satisfied
• Step 6:
Return to Step 2 and repeat the steps until an initial feasible solution has been
obtained.
Table 10.10 gives the results of each of iterations through which the VAM
assignment steps have been carried out for the example we have been
discussing. Table 10.11 gives the final allocation table.
Differences in Rows Differences in Columns Allocate
Deleted
Iterati Ro Ro Ro Ro Ro d Cell
Colu Colu Colu Colu Row
on w w w w w (Amount
mn E mn F mn G mn H /Column
A B C D Y )
1 5 5 10 10 0 10 15 20 10 XG (01) Row Y
2 5 5 10 10 - 0 15 0 5 BF (10) Row B
3 5 - 10 10 - 0 0 5 5 CE (10) Column E
4 15 - 10 5 - - 0 5 5 AH (14) Row A
5 - - 10 5 - - 10 15 25 CH (01) Column H
6 - - 10 15 - - 10 15 - CG (04) Row C
7 - - - 15 - - - - - DG (07) Row D
8 - - - - - - - - - DF (05)
Table 5.10: Results of Iterations done using VAM

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 DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

To Factory
E F G H
From Supply
10 30 25 15
A 14
14
20 15 20 10
B 10
10
10 30 20 20
C 15
10 04 01
30 40 35 45
D 12
05 07
0 0 0 0
Dummy (Y) 1
01
Destination 52
10 15 12 15
Requirements 52
Table 5.11: VAM assignments
The total cost according to this assignment would be (15x14) + (15x10) +
(10x10) + (20x04) + (20x01) + (40x05) + (35x07) + (0x1)
= Rupees 1005.00

Activity 5.2: Developing an initial feasible solution

Lanka Shirts owns factories in three towns, which distribute garments to three
of its retail dress shops in three other towns. Factory availabilities, projected
store demands, and unit shipping costs are summarised in the table below:

Shipping Cost per Unit

(in Rupees)
Factory Producti Stores Demand From To To To
on X Y Z
A 35 X 30 A 4 6 8
B 50 Y 65 B 3 7 2

C 50 Z 40 C 3 6 5
Use Vogel’s approximation method to find an initial feasible solution to this
transportation problem.

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5.4 Optimal Solution

However, the above may not be the optimum solution which will give the
minimum cost of transport. We must now check whether the basic solution is
the optimum solution. Developing an optimal solution in a transportation
problem involves evaluating each unused cell to determine whether a shift
into it is advantageous from a total-cost standpoint
Consider an example with the basic solution as,

REQUIREMENT
1 6 2 6
S

5 5
3 2 1 4
5 5
RESOURCE

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

The transport cost P is given by,

P = (5 x 2 + 5 x 3 + 1 x l + 1 x 4 + 2 x 2 +1x 7
P =.41 units
In the above basic solution, cell (1,2), (2,4), (3,1) (3,2), (3,3) and (3,4) are
called basic cells.
The basic solution is not necessarily the optimum solution which gives the
minimum cost. The objective is to find the optimal solution which will give
the minimum cost.
To find the optimal solution proceed as follows:
• Step 1:
Determine the shadow cost U, V for each row and column respectively,
using the formula.
Ui + Vj - Ci,j = 0
for each basic cell (i,j)
There are only (m + n - 1) such cells and (m + n) unknown U's and V's.
So, choose one of the U's or V's equal to zero. (Note: "m" is the number of
row and "n" is the number of columns.)
Therefore set U2 = 0.

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Then, applying
Ui + Vj - Cij = 0 to cell (2,4), U2 + V4 - C2,4 = 0
0 + V4 - 3 =0
V4 =3
Applying the same formula to the other basic cells (3,4), (3,3),.(3,2), (3,1)
and (1,2) in turn, we can find U,V , V,V and U respectively as follows:
Cell (3,4):
U3 + V4 - 7 = 0 U3 + 3 - 7 = 0
U3 = 4
Cell (3,3):
U3 + V3 - 2 = 0 4 + V3 - 2 = 0
V3 = -2
Cell (3,2):
U3 + V2 - 4 = 0 4 + V2 - 4 = 0
V2 = 0
Cell (3,1):
U3 + V1 - 1 = 0 4 + V1 - 1 = 0
V1 = - 3
Cell (1,2):
U1 + V2 - 2 = 0 U1 + 0 - 2 = 0
U1 = 2
We have now found the shadow costs, and we can write the matrix with the
shadow cost as follows:

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DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

• Step 2:
Now, calculate Ui + Vj - Ci,j for the non basic cells. For example, take the
non basic cell (1,1),
Ui + Vj - Ci,j = U1 + V1 – C11
=2-3-3
= -4
Similarly, for cell (2,3),
Ui + Vj - Ci,j = U2 + V3 - C2,3
=0-2-5
=-7
Try to calculate the Ui + Vj - Ci,j values for other non basic cells (1.3) (1,4),
(2,1), (2,2). The new metrix with all the Ui + Vj - Ci,j values included will be
as follows:

Note that in the above matrix Ui + Vj- Ci,j values is non basic cells are
enclosed in a triangle to distinguish them from the basic cells (you may use a
different colour if you so desire).
• Step 3:
If all Ui + Vj - Cij 0, then the solution is optimal.
Otherwise, select the most positive Ui + Vj - Cij and make that cell a basic
cell.
In the above example, not all Ui + Vj - Ci,j in non basic cells are less than or
equal to zero.

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DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

In fact, the value in non basic cell (1,4) is +1, which happens to be the most
positive Ui + Vj - Ci,j. Let us make cell (1,4) basic.
• Step 4:
Find a close succession of horizontal and vertical jumps (i.e. 'loop'), with a
basic cell at each corner, starting and ending at cell (1,4).

Now make the largest change possible to each corner cell on the loop, all
changes with the sign given, best of same site, maintaining feasibility of the
solution.
In the above example, the largest change possible is 1, to cell (3,4).
Since the sign in cell (3,4) is negative, we take away 1 from this cell, this
making zero allocation to that cell.
In cell (1,4), the sign is positive and we add 1 to that cell making an allocation
of 1 to that cell. Similarly, we take away 1 from cell (1,2) and add 1 to cell
(3,2).
The new basic solution will be as follows:

• Step 5:
Using the basic solution in step 6, we now calculate new U 's and V 's using
the procedure described in step 3.
The new shadow prices are as follows:
U2 = 0 V4 =0
U1 = 1 V2 =1
U3 = 3 V3 = -1
V1 = -2

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DMM6601- Unit 05: Management for Engineers Session 05: The Transportation Problem

• Step 6:
Using the new shadow prices just calculated. Calculate Ui + Vj - Ci,j’s for
this non basic cells.

In the above matrix, all Ui + Vj -Ci,j’s in the non basic cell are negative (
0). Therefore, above is the optimal so1ution.
The transportation cost is given by,
Cost = 4 x 2 + 1 x 4 +5 x 3 + 1 x 1+ 2 x 4 + 2 x 2 = 38 Units
Clearly, the above cost is less than that obtained for any other basic so1ution.
The above stepwise calculation may appear to be fairly lengthy, but in
practice it is not so. Most of the steps used above for the purpose of explaining
the procedure may not be necessary when tackling a problem.
Let us now solve the following problem.

5.5 Stepping Stone Method

The term stepping-stone appeared in early descriptions of the method, in
which unused cells were referred to as "water" and used cells as "stones",
from the analogy of walking on a path of stones half-submerged in water. The
stepping-stone method is an iterative technique for moving from an initial
feasible solution. The stepping-stone method will help us move from an initial
feasible solution to an optimal solution. It is used to evaluate the cost
effectiveness of shipping goods via transportation routes not currently in the
solution for the stepping-stone method to be applied to a transportation
problem, one rule about the number of shipping routes being used must first
be observed.
The rule is: the number of occupied routes (or squares) must always be equal
to one less than the sum of the number of rows plus the number of columns.

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5.6 Degeneracy
Degeneracy exists in a transportation problem when the number of filled cells
is less than the number of rows plus the number of columns minus one (m +
n - 1). Degeneracy may be observed either during the initial allocation when
the first entry in a row or column satisfies both the row and column
requirements or during the Stepping stone method application, when the
added and subtracted values are equal. Degeneracy requires some adjustment
in the matrix to evaluate the solution achieved. The form of this adjustment
involves inserting some value in an empty cell so a closed path can be
developed to evaluate other empty cells. This value may be thought of as an
infinitely small amount, having no direct bearing on the cost of the solution.

Summary
The transportation table is a table where supply availability at each source is
shown in the far right column and the destination requirements are shown in
the bottom row. Each cell represents one route. The unit shipping cost is
shown in the upper right corner of the cell, the amount of shipped material is
shown in the centre of the cell.
The initial allocation in transportation problems entails assigning numbers to
cells to satisfy supply and demand constraints. There are several methods by
which this cane be done: The North-West Corner method, The Least Count
method and Vogel’s Approximation method (VAM) are discussed in this
session.
Developing an optimal solution in a transportation problem involves
evaluating each unused cell to determine whether a shift into it is
advantageous from a total-cost standpoint. If it is, the shift is made, and the
process is repeated. When all cells have been evaluated and appropriate shifts
made, the problem is solved. One approach to making this evaluation is the
Stepping Stone Method.

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