TRANSPORTATION MODEL(TM)

The objective of TM is to develop a cost effective plan to distribute goods from several points of supply sources
( factories, plants) to a number of points, of demand (destination, site, consumer etc). Transportation model is a cost-
minimizing and profit-maximizing tool depending on the problem involved. Transportation model can also be used
when a firm is trying to decide where to locate a new facility.

The following information are needed to use TM:

1. A list of origins and corresponding capacity or supply quantity available per period.
2. A list of destinations and the respective quantity demanded per period.
3. The unit cost of shipping items from each origin to each destination.

Assumptions of the TM
1. Items to be shipped are homogenous (they are the same regardless of their source or destination).
2. Shipping cost per unit on a route is the same throughout that route regardless of the number of units shipped. Total
cost on the route is total number shipped on that route multiplied by the unit cost on the route.
3. There is only one route or mode of transportation being used between each origin and each destination.

Major steps in the process

1. Use NWCR, Greedy method or VAM to obtain the initial allocation or initial solution.
2. Test the initial allocation for degeneracy. .
3. Calculate the cost (profit in the case of maximization) of implementing the solution.
4. Test the solution for optimality
5. Improve the solution or interpret result. Any solution could be improved by using either the Stepping-Stone method
or the modified distribution method (MODI).

Example:

RCC produces cement packaged in bags in three factories and transports them to four project sites as shown below.

Quarries/capacities,   Project/demands
A produces 100 bags, W demands 80 bags
B produces 200 bags,  X demands 90 bags
C produces 150 bags,  Y demands 120 bags , Z demands 160 bags.
                                             
The table below presents the cost (N) of transporting a unit or bag of cement from each of the factories to each of the
project sites.

Project
Factor W X Y Z How should RCC transport the bags of cement from factory to project sites at the least
y transportation cost? Use the Greedy method to obtain the initial allocation.
A 4 7 7 1
B 12 3 8 8
C 8 10 16 5

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Solution

Step 1: Develop the initial table using the Greedy method

Table 1.1 Initial allocation using greedy method

To

From W X Y Z Supply
4 7 7 1

100 100
A
12 3 8 8

90 110 200
B
8 10 16 6

80 10 60 150
C
450

450
Demand 80 90 12 160
0

Step 2. Test for degeneracy:

The number of used cells (stone cells) must equal:
# rows in table + # of columns - 1= R+C-1 or 3+4 -1 = 6 = number of stone cells in the table, otherwise the solution is said
to be degenerate.
Table 1.1 is not degenerate.
The stepping-stone method will be used in calculating the improvement indexes. How to trace out the path will be discussed in
class.

Step 3. Calculate the cost of implementing table 1.1

Stone cell allocation     Cost N
AZ 100 * 1      100.00
BX 90  *3      270.00
BY 110 * 8    880.00
CW 80* 8   640.00
CY  10 *16      60.00
CZ  60* 5       300.00.        Total cost of implementing table1.1 equals N 2, 350.00

Step 4. Test for optimality.

The improvement index is a numerical quantity that indicates how the inclusion of an empty cell – presently unused
transportation route - in the transportation plan will affect the total transportation cost.

Every empty cell has an improvement index whose value may be positive, negative, or zero. The empty cells or unused routes are
those cells without any allocation in them. In this problem, the empty cells are AW, AX, AY, BW, BZ, and CX.

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The purpose of testing for optimality is to enable us find out whether the total transportation cost above, N 2, 350.00 for table 1.1,
could be reduced by including any of the presently unused routes in the transportation plan. This we do by determining the effect of
transporting a unit product through each of the empty cells – the presently unused routes.

Positive improvement index means that cost will go up by the calculated value per unit when that cell in question is used
as part of the transportation route. Negative improvement index means that the cost will be reduced by the calculated
value per unit transported through that route.

Empty cell   Closed path for the cell   Improvement Index (N)
AW: + AW–CW+ CZ–ZW; +4 - 8 +5 -1 =0
AX: + AX–BX+BY–CY+CZ–AZ +7 - 3 +8 -16 + 5 -1 = 0

AY: +AY-AZ+CZ-CY; +7-1+ 5-16  =-5 ←

BW: + BW–CW+CY–BY; +12 - 8 +16 - 8  = +12
BZ: +BZ– BY+CY–CZ; + 8 – 8 +16 - 5 = +11
CX: +CX–CY+ BY–BX; +10 -16 + 8 -3  = -1

From the improvement indexes shown above, cell AY is the most viable. For each bag of cement transported through it, the total
cost of transportation will decrease by N5 as against N3 and N1 for routes AX and CX respectively. The inclusion of AW has no
effect on the total cost of transportation. Consequently, route AY will be introduced into the distribution plan. Routes BW and BZ
have positive improvement indexes +12 and +11 respectively. These values indicate that total cost of transportation will increase by
N12 and N11 respectively if BW and BZ each becomes part of the distribution plan.

The conditions for optimality are as follows:

1. If the problem involves minimization of cost, loss, waste, risks or damages, optimality would have been
attained when all the improvement indexes calculated are either zero or positive.
2. If the problem involves maximization of profit, reward or benefits, optimization would have been attained
when all the calculated improvement indexes are either negative or zero.

Step 5. Solution is not optimum, there is need for an improvement

Introduce AY whose closed path is +AY-AZ+CZ-CY in the distribution plan. To determine the number to be used in performing the
improvement on our solution, we first identify the cells in the closed path with minus sign in them. Secondly, determine the
smallest allocation among those cells with minus sign. Thirdly, add this smallest number to the content of any cell with a plus sign
and subtract it from those in whose cells there is a negative sign. In table 1.2, the smallest allocation in cells with minus sign is 10 in
cell CY.

Table 1.2 Improvement of last solution (Table 1.1)

To

From Supply
W X Y Z
4 7 7 1

+ 100 - 100
A
12 3 8 8

90 110
B 200
8 10 16 5

80
3
 C 10 - 60 + 150
450

450
Demand 80 90 120 160

In terms of allocation, the closed path (+AY-AZ+CZ-CY) is +AY – 100 + 60 – 10.

AY = 10; AZ = 100-10 = 90; CZ = 60 + 10 =70; CY = 10 – 10 = 0.

When we add and subtract 10 throughout the closed path, we shall have table 1.3 below.

Cell CY is no more a stone cell but an empty cell. While we shall reflect the new allocations in the other cells, we shall
not indicate zero or figure 0 in cell CY. We shall later discuss the condition under which zero could be placed  as an
allocation in a cell.

Table 1.3 Improvements over Table 1.2

To

From Supply
W X Y Z
4 7 7 1

10 90 100
A
12 3 8 8

90 110
B 200
8 10 16 5

80 70
C 150
450

450
Demand 80 90 120 160

For table 1.3 we need to test for degeneracy: R + C – 1 = 3 + 4 – 1 = 6. Count the number of stone cells in table1.3. It
is six, is it not? If your answer is yes, then the solution is not degenerate.

Calculate the cost of implementing Table 1.3. Is it not N2350 – N 5 x 10 = N 2, 300.00?

Stop and be sure that you have understood this method of calculating the cost of implementing a solution. This
method can only be used when the improvement index of the cell just introduced into the distribution plan is known.
The improvement index of cell AY was - N 5 and 10 units of product were moved through cell AY, the total reduction in
transportation cost becomes N5 * 10 = N50. The total cost of transportation now is N2,350 - N50 = N 2, 300.00

Test for optimality. We shall be repeating the process of tracing out the closed paths for each empty cell and
calculating their respective improvement indexes.

Empty cell  Improvement Index (N)

AW  0
AX  +5
BW  + 7
4
BZ   + 6 
CX  +4
CY  +5
Observe that all the improvement indexes are now positive or zero. This means that the inclusion of any of the unused
cells in table 1.3 into the distribution plan will either increase the transportation cost or not have effect on it. It could
therefore be concluded that the best allocation plan or optimum solution has been obtained and this is table
1.3. The cost of implementing it is
N 2,300.00.

An optimum solution is not unique if one or more of its improvement indexes is zero.

INTERPRETATION OF RESULT

From factory A, allocate 10 bags of cement to project Y and 90 bags project Z.

From factory B, allocate 90 bags of cement to project X and the remaining 110 bags to Y.

From factory C allocate 80 bags of cement to project W, and the remaining 70 Z.

The expected total cost of transportation is N2, 300.

USING THE NORTH WEST CORNER RULE (NWCR) TO PERFORM INITIAL ALLOCATION

Table 1.4 Initial allocation using NWCR

To

From Supply
W X Y Z
4 7 7 1

A 80 20 100
12 3 8 8

B 70 120 10
200
8 10 16 5

C 150
150
450

Demand 120 450

80 90 160

Test for degeneracy: R + C – 1 = 3 + 4 – 1 = 6 of stone cells.

The Table 1.4 is not degenerate.
Calculate the cost of implementing table 1.4
Test Table 1.4 for optimality and then solve the problem

DEGENERACY IN TRANSPORTATION PROBLEM

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So far in our discussion we have we have observed that the number of stone cells in our tables have satisfied the
relationship # rows + # columns – 1 = # stone cells (R+C -1 = # stone cells) . If this relationship is violated degeneracy
is said to have occurred. But what is the implication of degeneracy? When degeneracy occurs, it will be impossible to
trace out a closed path for some empty cells. Consequently, the improvement indexes of the affected cells cannot be
computed, thus impeding solving to optimality. A degenerate problem cannot be solved to optimality unless the
degeneracy has been removed. There are two types of degeneracy.

1 There are excess number of stone cells (R+C-1< # stone cells). This usually occurs in the initial solution as a result
of improper allocation or defective problem formulation. When the error is identified and corrected this type of
degeneracy normally disappears.

2 There are insufficient number of stone cells in the solution (R+C-1 > # stone cells). This may occur in the initial
allocation or in subsequent ones.

Degeneracy in initial allocation. Let us use NWCR to generate the initial allocation for the table below.

Table 1.5 Degenerate initial allocation using NWCR

K L M

4 8 8

P 35 20 * 55
16 24 16

T 25 * 25
8 16 24

F * * 35 35

35 45 35

Test for degeneracy: R+C-1= 3+3-1= 5, but the number of stone cells is 4. The solution has one stone cell less than
expected. The solution is degenerate.

None of the empty cells except TK has a closed path (those cells affected by the degeneracy bear asterisks just to enable you
identify them.

But why do we need to identify those empty cells affected by the degeneracy? We do this because it is only through
those affected empty cells that the degeneracy can be eliminated. To eliminate the degeneracy make a zero
allocation to any of those degeneracy-affected empty cells. Only affected empty cells must be so used. The

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cell in which the allocation is made is now regarded and counted as a stone cell having a zero allocation. Like
other stone cells, it can be part of the closed path of the empty cells.

In the above problem only one empty cell will receive a zero allocation thus becoming a stone cell. This is because the
difference between R+C-1 and the number of stone cells after the initial allocation was one. If the difference had
been two, then two degeneracy-affected empty cells will each receive a zero allocation to become two stone
cells. Generally, it is the difference between R + C-1 and the number of stone cells in the degenerate solution that
determines the number of degeneracy-affected empty cells that will receive zero allocation to become stone cells.

If in the above degenerate solution, we make a zero allocation to TM, the closed path of PM will be: +PM-TM+TL-PL.
The improvement index of PM becomes: +8-16+24-8 = +8. If this path is to be used in improving the solution the
procedure still remains the same: +PM-0+25-20. Zero, being the smallest number with a negative sign, will be added
and subtracted as usual to those cells in the path. The zero will be transferred to cell PM while TM becomes an empty
cell. Let us now see how to deal with degeneracy at later stages of the solution.

Degeneracy during subsequent solution stages. In this case the initial allocation is not degenerate but degeneracy
sets in during subsequent stages as we solve to optimality. Table 1.6 is a nondegenerate initial solution obtained using
the NWCR. The improvement indexes of the empty cells are: IN = +8; JL = +8; KL = +8; KM = -8. The solution could
be improved (for minimization problem) with KM whose closed path is +KM -KN+JN-JM. In terms of allocation the path
becomes:+KM-30+30-30. Table 1.7 below presents the effect of using 30 to improve the solution.

Table 1.6 Nondegenerate initial solution using NWCR

L M N
4 8 24
I
45 45 90
8 4 8
J
30 30 60
16 4 16
K
30 30

45 75 60

Table1.7 Degenerate improved solution

L M N

7
 4 8 24

I 45 45 90
8 4 8
30-30= 0
30 + 30 60
J
16 4 16

+30 30 - 30= 0 30
K

45 75 60

Two cells JM and KN become empty simultaneous. The improved solution now has four stone cells instead of five in
view of the formula R+C-1. This is a case of degeneracy occurring in the process of solving to optimality. This normally
happens, if on the path, two or more stone cells (bearing negative signs) on that path, tie for the smallest allocation. In
the above example, this was the case with stone cells JM and KN, both bear negative signs, have 30 units of allocation
which is the least allocation in those cells with negative sign. To eliminate the degeneracy, we shall retain as a
stone cell one of those cells that became empty but it will have a zero allocation . As in the first case, the extent
of degeneracy determines the number of such cells to be so retained. If three cells became empty in the process to
engender degeneracy, two of such cells will be retained as stone cells with zero allocations. Such retained cells, like
other stone cells can be part of the closed path or circuit of the empty cells.