Transportation Problem

What is a Transportation Problem? A transportation problem is concerned with transportation methods or selecting routes in a product distribution network among the manufacturing plants and distribution warehouses situated in different regions or local outlets. In applying the transportation method, management is searching for a distribution route, which can lead to minimization of transportation cost or maximization of profit. The problem involved belongs to a family of specially structured LPP called network flow problems. What is a Balanced and Unbalanced Transportation Problem? Balanced transportation problem Transportation problems that have the supply and demand equal is a balanced transportation problem. In other words requirements for the rows must equal the requirements for the columns. Unbalanced transportation problem An Unbalanced transportation problem is that in which the supply and demand are unequal. There are 2 possibilities that make the problem unbalanced which are (i) (ii) Aggregate supply exceeds the aggregate demand or Aggregate demand exceeds the aggregate supply.

Such problems are called unbalanced problems. It is necessary to balance them before they are solved.

2 Possibilities That Make The Problem Unbalanced

Aggregate supply exceeds the aggregate demand

Aggregate demand exceeds the aggregate supply

Balancing the transportation problem Where total Supply exceeds total demand.

In such a case the excess supply is, assumed to go to inventory and costs nothing for shipping(transporting). This type of problem is balanced by creating a fictitious destination. This serves the same purpose as the slack variable in the simplex/method A column of slack variables is added to the transportation tableau which represents a dummy destination with a requirement equal to the amount of excess supply and the transportation cost equal to zero. This problem can now be solved using the usual transportation methods. When aggregate demand exceeds aggregate supply in a

transportation problem When aggregate demand exceeds aggregate supply in a transportation problem a dummy row is added to restore the balance. This row has an availability equal to the excess demand and each cell of this row has a zero transportation cost per unit. Once the problem is balanced it can be solved by the procedures normally used to solve a transportation problem. What is Degeneracy in a Transportation Problem?

The initial basic feasible solution to a transportation problem should have a total number of occupied cell (stone squares) which is equal to the total number of rim requirements minus one i.e. m + n 1. solution is degenerate. When this rule is not met the

Degeneracy may occurIf the number of occupied cells is more than m + n 1. This type of degeneracy arises only in developing the initial solution. It is caused by an improper assignment of frequencies or an error in formulating the problem. In such cases one must modify the initial solution in order to get a solution which satisfies the rule m + ni. The problem becomes degenerate at the(i) Initial stage m+n

When in the initial solution the number of occupied cells is less than

1 (rim requirements minus 1) i.e. the number of stone squares in insufficient

(ii)

When two or more cells are vacated simultaneously

Degeneracy may appear subsequently when two or more cells are vacated simultaneously in the process of transferring the units, along the closed loop to obtain an optimal solution. When transportation problem becomes degenerate When transportation problem becomes degenerate it cannot be tested for optimality because it is impossible to compute u and, v values with MODI method. To overcome the problem of insufficient number of occupied cell we proceed by assigning an infinitesimally small amount (close to zero) to one or more (if needed) empty cell and treat that cell as occupied cell. This amount is represented by the Greek letter E (epsilon). It is an insignificant value and does not affect the total cost.

But it is appreciable enough to be considered a basic variable.

When the initial

basic solution is degenerate, we assign c to an independent empty cell. An independent cell is one from which a closed loop cannot be traced. It is preferably assigned to a cell which has minimum per unit cost. After introducing e we solve the problem using usual methods of solution.

Steps to solve a Transportation Problem. A transportation problem can be solved in 2 phases PHASE I Step 1: Check whether the given T.P. is balanced or not

Step 2: Develop initial feasible solution by any of the five methods Step 1: Check whether the given T.P. is balanced or not. If it is unbalanced then balance it by adding a row or a column. Step 2: Develop initial feasible solution by any of the five methods: a) North West Corner Rule (NWCR) or South West Corner Rule (SWCR) b) Row Minima Method (RMM) c) Column Minima Method (CMM)

d) Matrix Minima Method (MMM) e) Vogels Approximation Method (VAM) We discuss here the two commonly used methods to make initial assignments (1) Northwest corner rule (2) Vogels Approximation Method (VAM)

(1) Northwest Corner Rule: Start with the northwest corner of the transportation tableau and consider the cell in the first column and first row. We have values a1 and b1 at the end on the first row and column i.e. the availability at row one is a1 and requirement of column 1 is b1. (i) If al > b1 assign quantity b1 in the cell, i.e. x1 b1. Then proceed horizontally to the next column in the first row until a1 is exhausted i.e. assign the remaining number a1 - b1 in the next column. (ii) If al < b1 then put Xl al and then proceed vertically down to the next row until b1 is satisfied. i.e. assign b1 a1 in the next row. (iii) If a1 = b1 then put XII = a1 and proceed diagonally to the next cell or square determined by next row and next column. In this way move horizontally until a supply source is exhausted, and vertically down until destination demand is completed and diagonally when a1 = b1, until the south-east corner of the table is reached. (2) Vogels Approximation Method (VAM): The north-west corner rule for initial allocation considers only the requirements and availability of the goods. It does not take into account shipping costs given in the tableau. It is therefore, not a very sound method as it ignores the important factor, namely cost whih we seek to minimize. The VAM, on the other hand considers the cost in each cell while making the allocations we explain below this method.

(i) Consider each row of the cost matrix individually and find the difference between two least cost cells in it. Then repeat this exercise for each column. Identify the row or column with the Largest difference (select any one in case of a tie). (ii) Now consider the cell with minimum cost in that column (or row) and assign the maximum units possible to that cell. (iii) Delete the row/column that is satisfied. (iv) Again find out the differences and proceed in the same manner as stated in earlier paragraph and continue until all units have been assigned.

PHASE II TEST FOR OPTIMALITY Before we enter phase II, the following two conditions should be fulfilled in that order. (i) Obtaining a basic feasible solution implies finding a minimum number of ij values. This minimum number is m + n - 1. Where m is the number of origins n is the number of destinations. Thus initial assignment should occupy m + n - I cells i.e. requirements of demand and supply cells minus 1.

(ii) These ij should be at independent positions These requirements are called RIM requirements. Test for optimality (or improvement): After obtaining the initial feasible solution, the next step is to test whether it is optimal or not. We explain here the Modified Distribution (MODI) Method for testing the optimality. If the solution is non-optimal as found from MODI method then we improve the solution by exchanging non-basic variable for a basic variable. In other words we

rearrange the allocation by transferring units from an occupied cell to an empty cell that has the largest net cost change or improvement index, and then shift the units from other related cells so that all the rim (supply, demand) requirements are satisfied. This is done by tracing a closed path or closed loop.

Step 1: Add a column u to the RHS of the transportation tableau and a row v at the bottom of the tableau.

Step 2: Assign, arbitrarily, any value to u or v generally u = 0.

Step 3 Having determined u1 and v calculate ij = (u1 + v1) for every unoccupied cell.

Step 4: If the solution is not optimal select the cell with largest positive improvement index.

Step 5: Test the solution again for optimality and improve fit if necessary

Step I: Add a column u to the RHS of the transportation tableau and a row v at the bottom of the tableau. Step 2: Assign, arbitrarily, any value to u or v generally u = 0. This method of assigning values to u1 and v1 is workable only if the initial solution is non-degenerate i.e., for a table there are exactly m + n -1 occupied cells. Step 3: Having determined u1 and v calculate ij = (u1 + v1) for every unoccupied cell. This represents the net cost change or improvement index of these cells (1) If all the empty cells have negative net cost change ij, the solution is optimal and unique (2) If an empty cell has a zero Xij and all other empty cells have negative Xij the solution is optimal but not unique.

(3) If the solution has positive Ai for one or more empty cells the solution is not optimal. Step 4: If the solution is not optimal select the cell with largest positive improvement index. Then trace a closed loop and transfer the units along the route. Tracing loop (closed path): 1) Choose the unused square to be evaluated. (2) Beginning with the selected unused square trace a loop via used squares back to the original unused squares. Only one loop exists for any unused square in a given solution. (3) Assign (+) and () signs alternately at each square of the loop beginning with a plus sign at the unused square. Assign these sign in clockwise or anticlockwise direction. These signs indicate addition or subtraction of units to a square.

(4) Determine the per unit net change in cost as a result of the changes made in tracing the loop. Compare the addition to the decrease in cost. It will give the improvement index. (It is equivalent to j in a LPP). (5) Determine the improvement index for each unused square. (6) In a minimization case. If all the indices are greater than or equal to zero, the solution is optimal. If not optimal, we should find a better solution. We may also note the following points: (i) An even number of at least four cells participate in a closed loop. An occupied cell can be considered only once. (ii) If there exists a basic feasible solution with m + n 1 positive variables, then there would be one and only one closed loop for each cell.

(iii) All cells that receive a plus or minus sign except the starting empty cell, must be the occupied cells. (iv) Closed loops may or may not be square or rectangular in shape. They may have peculiar configurations and a loop may cross over itself. Step 5: Test the solution again for optimality and improve fit if necessary. Repeat the process until an optimum solution is obtained. What are the differences between assignment problem and transportation problem? The differences between AP and TP are the following: 1. TP has supply and demand constraints while AP does not have the same. 2. The optimal test for TP is when all cell evaluation \s are greater than or equal to zero whereas in AP the number of lines must be equal to the size of matrix. 3. A TP sum is balanced when demand is equal to supply and an AP sum is balanced when number of rows are equal to the number of columns. 4. for AP. We use Hungarian method and for transportation we use MODI method 5. In AP. We have to assign different jobs to different entities while in transportation we have to find optimum transportation cost. What are the advantages and disadvantages of LPP? A LPP is concerned with the use of allocation of resources such as time, capital, materials, etc. THE ADVANTAGES LPP ARE: 1. It helps the sale manager to negotiate prices with customers. He can price on the basis of customer demand and price on the basis of supply and demand of them market. 2. Production manager can formulate optimal maximum product mix. 3. it helps manager improve his decision making abilities.

4. it helps make the best decision for cost minimization and profit maximization. THE DISADVANTAGES OF LPP ARE: 1. A primary requirement for LPP is the objective function and every consistent must be linear. In practical situation it is not possible to state all coefficients in the objective function and constraints with certainty. 1 A B C D 2 10 13 4 2 4 8 3 6 3 6 7 9 8 4 11 5 12 3

2. There is no guarantee that LPP will give an integer value solution. eg. a solution may call for 9.3 trucks or 8.7 units of product. 3. It does not take into consideration the effect of time and uncertainty. 4. There may be cases of infeasibility and unboundedness

. Q-1:-- A product id produced by four factories A, B, C, and D. The unit production costs in them are Rs.- 2, 3, 1 and 5 respectively. Their production capacities are factory A50 units, factory B70 units, factory C30 units and factory D50 units. These factories supply the product to four stores, demands of which are 25, 35, 105, and 20 units respectively. Unit transport cost in rupees from each factory to each store in the table below.

Determine the extent of deliveries from each of the factories to each of the stores so that the total production and transportation cost is minimum.

Solution:

First of all we shall compile a new table of unit costs which consists of both production and transportation costs. The new table or matrix is given below. TABLE1 1 A B C D 2+2 10+3 13+1 4+5 2 4+2 8+3 3+1 6+5 3 6+2 7+3 9+1 8+5 4 11+2 5+3 12+1 3+5 5 0 7 0 3 0 5 0 105 25 20 35

StepI Make the transportation Matrix Let us again write down the above matrix(TABLE1 )

A B C D

4 13 14 9

6 11 4 11

8 10 10 13

13 8 13 8

5 0 7 0 3 0 5 0

25 105 20

35

Total supply = 200 Total demand = 185 Surplus = 15 Supply and demand are not balanced in this case and we have a surplus of 15 units of the product. Therefore, we create a fictitious(dummy) destination(store). The associated cost coefficients are taken as zero, as the surplus quantity remains lying in the respective factories and is, in fact, not shipped at all. Therefore our starting cost matrix becomes. TABLE2 1 A B C D 4 13 14 9 2 6 11 4 11 3 8 10 10 13 4 13 8 13 8 d 0 0 0 0 deman d 50 70 30 50 supply 20 25 15 35 105

StepII Find a Basic Feasible Solution

We shall use Vogels approximation method to find the initial feasible solution. TABLE3

1 A 4 (25) B 13

2 6 (5) 11

3 8 (20) 10 (70)

4 13

d 0

Supply

Penalties

50/25/20 2 5

4 2 2

14

4 (30)

10

13

70 2 2 2

8 2 2

11

13 (15)

8 (20)

0 (15)

30

4 6

50/35/15 8 1 1 3 5 5 Demand 20 Penalties 0 0 5 0 5 0 2 0 3 0 2 5 2 25 15 5 0 5 2 2 35/5 2 105/85 2

The initial feasible solution is given by the following Matrix:

TABLE4

1 A 4 (25) B 13

2 6 (5) 11

3 8 (20) 10 (70)

4 13

d 0

Supply

50 8 0 70 13 0 30

14

4 (30)

10

11

13 (15)

8 (20) 105

0 (15) 50

Demand 20

25 15

35

StepIII Perform Optimality Test From the above matrix we find that (a) Number of allocations = m+n-1 = 4+5-1 = 8. (b) These m+n-1 allocations are in independent positions. Therefore optimality test can be performed. These consist of the following sub steps:

TABLE5 Vj --------Ui 4 6 2 9 4 13 Matrix of ui+vj for occupied cells 8 0 4 6 8 10 0 2 4 -1 -9

TABLE6 Vj --------Ui 4 6 2 9 6 2 9 8 11 6 3 5 1 -5 -3 -7 0 2 4 -1 -9

Matrix with cell values of ui+vj for empty cells

TABLE7 Vj --------Ui 4 6 2 9 7 12 0 3 0 4 10 3 12 5 3 7 0 2 4 -1 -9

Cell evaluation matrix

Since cell values are positive, the first feasible solution is optimal. Since TABLE6 contains zero entries, there exist alternate optimal solutions. The practical significance of demand being 15 units less than supply is that the company may cut down the production of 15 units at the factory where it is uneconomical. The optimum transportation plus production cost Z = Rs. (4*25+6*5+8*20+10*70+4*30+13*15+8*20+0*15) Z = Rs. 1,465.