Professional Documents
Culture Documents
Introduction
A typical transportation problem is like this. A matrix is given where sources are
given row-wise, destinations are indicated column-wise and unit cost of
transportation from each source to each destination is provided. Also indicated is
the supply at each source and demand at every market.
Plant Market
A
X
Supply B Y Demand
C Z
If aggregate demand (AD) is equal to aggregate supply (AS), the problem is called
balanced transportation problem and if the two do not match, it is called
unbalanced. An unbalanced problem is balanced first by introducing a dummy
source (if AS<AD) or a dummy destination (if AD>AS). The cost elements of the
dummy row/column are taken to be zero. If, however, penalties for not satisfying
demand are given, they should be taken instead of zeros. In any case, the solution
to a problem begins only when it is a balanced one.
Problem Statement
1
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
∑ = for j = 1,2,3,…..,n
1
c11 c12 …… c1n
2
Source
…… ……
…… …… …… ……
m
cm1 cm2 …… cmn
Demand ∑ =∑
……
1. Finding Initial Solution There are three methods for finding initial solution to
the problem.
(a) North-west Corner Rule: Begin from the north-west corner of the table.
Consider first plant supply and first market demand. The lower of the two shall be
assigned to the first-plant first-market route. If supply is more than demand, shift
to the next the market and if supply is less than demand then move to the next
plant. In case the supply and demand are equal, move diagonally to the next plant
2
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
and next market route. In any case, again consider the demand and supply and
make the allocation by taking lower of the two. Move in a similar manner until all
allocations are made. This gives initial feasible solution to the problem.
(b) Least Cost Method: In this method, the route with the minimum cost (that is to
say, the cell with the least unit cost) is selected and the supply and the demand at
the plant and market involved are considered. The lower of these two is allocated
in the cell chosen and the plant or market whichever is satisfied is deleted. Both
are deleted if they are both satisfied due to equal demand and supply. If the plant
is satisfied in the allocation, then the demand at the market is adjusted and if the
market is satisfied, then the plant supply is adjusted. In case there is more than
one cell with the same minimum cost, the one where larger number of units can
be allocated is selected. Again the remaining plants and markets are considered
and the same steps are taken. The process is continued until all allocations are
made.
(c) Vogel’s Approximation Method (VAM) or Penalty Method: This method works
as follows.
(i) Obtain the difference between pair of minimum cost values for each of the
rows and columns.
(ii) Select the largest of the cost differences and choose the least-cost cell in that
row/column. Consider the supply and the demand at the plant and market
involved. The lower of these two is allocated in the cell chosen and the plant or
market whichever is satisfied is deleted. Both are deleted if they are both satisfied
due to equal demand and supply. If the plant is satisfied in the allocation, then the
demand at the market is adjusted and if the market is satisfied, then the plant
supply is adjusted. In case there is a tie in the largest cost difference values, the
one corresponding to which larger number of units can be allocated is selected.
(iii) Calculate the cost differences again for the reduced problem and proceed in
the same manner as above. Repeat until all allocations are made.
In a given problem, one of these methods is used to find the initial solution.
Usually, the north-west corner rule is not used because it does not take cost into
consideration while making allocations. The other two methods tend to provide
initial solution with comparatively lower cost. Even in these two, the penalty
method usually gives better results.
For all rows and columns, and values are obtained. Each row and each
column is assigned one value in such a way that, corresponding to every occupied
3
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
cell, the row and the column adds up to the cost value, For this, one of the
rows/columns is assigned a value arbitrarily. Usually, the first row value u1 value
is set equal to zero and other values are determined one by one, using this and the
other successively derived values. Once all these values are obtained, calculate
= + – . Now, if all ≤0, then the solution is optimal, otherwise not. A
positive in a cell indicates that allocating goods in that cell can reduce cost.
Thus, if a cell 2,3 in the matrix has = 3, it means that every unit allocated to this
route, that is, every unit sent from plant 2 to market 3 would save cost at the rate
of Rs 3 per unit.
Journal Problems - I
2. A company has three plants at locations A, B and C which produce the same 10
product. It has to supply this to buyer located at D, E and F. The weekly plant
capacities for A, B and C are 100, 800 and 150 units respectively, while the buyer
requirements are 750, 200 and 500 units respectively for D, E and F. The unit
shipping costs (in Rs) are given here
Buyer
Plant
D E F
A 8 4 10
B 9 7 9
C 6 5 8
Assume that the penalty for failing to supply buyer requirement is Rs. 4, Rs. 3 and
Rs. 3 per unit in respect of D, E and F respectively. Determine the optimal
distribution for the company so as to minimize the cost of transportation and
penalty payable. Use VAM and MODI methods.
a. Balance the problem by using penalty. 2
b. Find the IBFS by VAM 4
c. Test the optimality of the solution by MODI method. 2
d. Give the transportation schedule and total transportation cost. How much is the 2
amount of penalty to be paid for the unsatisfied demand?
5
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
In the optimal solution, if all ∆ij < 0, then the solution is unique optimal solution.
However, if some ∆ij = 0, then the problem has multiple optimal solutions. If an
alternative optimal solution is desired, then draw the closed path beginning with
the cell having ∆ij = 0 and find improved solution in same manner as discussed
earlier.
Prohibited Routes
Journal Problems - II
5. The table below records transportation costs per unit of a product from origins
O1, O2, O3 and O4 to destinations D1, D2, D3, D4 and D5. The capacities and
requirements are mentioned in the table.
Destination
Origin Capacity
D1 D2 D3 D4 D5
O1 12 4 9 5 9 55
O2 8 1 6 6 7 45
O3 1 12 4 7 7 30
O4 10 15 6 9 1 50
Requirement 40 20 50 30 40
a. Employing VAM, make the initial allocations to the allocations to the origins to 4
satisfy the requirements of the destinations and test the optimality of these
allocations.
b. Use MODI method for obtaining the optimal solution that would minimize the 3
total cost of transportation.
c. Find the total cost implied by the solution. 1
6
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
6. A cement company has three factories which manufacture cement which is then
transported to four distribution centers. The quantity of monthly production of
each factory, the demand of each distribution center and the associated
transportation cost per quintal are given as follows:
Distribution Centers Monthly
Factories Production (in
W X Y Z
quintals)
A 10 8 5 4 7,000
B 7 9 15 8 8,000
C 6 10 14 8 10,000
Monthly Demand(in
6,000 6,000 8,000 5,000
quintals)
a. Suggest the optimal transportation schedule. 8
b. Is there any other transportation schedule which is equally attractive? If so, write 2
that.
c. If the company wants at least 5,000 quintals of cement are transported from 5
factory C to distribution center Y, will the transportation schedule be different? If
so, what will be the new optimal schedule and the effect on cost?
d. Suppose the company desires to send at most 500 quintals of cement from factory 5
C to distribution center Y, what will the optimal transportation schedule be? Also,
obtain the total transportation cost in such case.
Degeneracy
7
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
7. A company has three cement plants from which cement has to be transported to
four distribution centers. With identical costs of production at the three plants,
the only variable costs involved are transportation costs. The monthly demand at
the four distribution centers and the unit costs the plants to the distribution
centers (in Rs.) are given below:
Distribution Centers Monthly
Plants Production
W X Y Z
(tonnes)
A 500 1000 150 800 10000
B 200 700 500 100 12000
C 600 400 100 900 8000
Monthly
Demand 9000 9000 10000 4000
(tonnes)
8. A company has four factories manufacturing the same commodity, which are
required to meet the demands at four warehouses. The supplies and demands as
also the cost per transportation from factory to warehouse in rupees per unit of
product are given in the following table:
Distribution Centers Supply
Factory
X Y Z W (units)
A 25 55 40 60 60
B 35 30 50 40 140
C 36 45 26 66 150
D 35 30 41 50 50
Demand
90 100 120 140
(units)
a. Derive an optimal strategy of transportation of goods from factories to the 9
warehouses and assess the optimal cost.
b. If a new transporter agrees to transport goods from factory C to warehouse W at 1
a unit cost of Rs.50, analyze the impact of this on your current optimal solution.
8
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
10. Determine optimal solution to the problem given below. Obtain the initial solution 10
by VAM.
To Markets
Plants Supply
M1 M2 M3 M4
P1 4 2 9 1 40
P2 20 6 11 3 40
P3 7 1 0 14 50
P4 7 1 12 6 90
Demand 90 30 50 30
11. The table given below has been taken from the solution procedure of a
transportation problem, involving minimization of cost (in rupees).
Stockists Monthly
Factories Capacity
X Y Z
(units)
31 25
A 56
4 8 8
41 41
B 82
16 24 16
77
C 77
8 16 25
Monthly
Demand 72 102 41
(units)
a. Show that the above solution is not optimal.
b. Find an optimal solution.
9
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
c. Does the problem have multiple solutions? Give reasons. If so, find one more
optimal solution.
d. Comment upon the managerial significance of multiple optimal solutions.
e. If it is considered necessary to transport 20 units from factory A to stockist Z,
what will be the least-cost distribution schedule and the effect on cost?
f. In the alternate solution, If the transport cost from factory A to stockist Z is
increased by Rs. 5 per unit, will the solution change? If so, find the new solution.
12. The following table gives one of the possible solutions to a transportation problem
involving three sources and four destinations:
D1 D2 D3 D4
200 100
S1
10 6 18 23
150
50
S2
4 9 13 10
50 350
S3
7 13 15 5
a. Is the above solution degenerate? 1
b. Is the above solution optimal? Is it a unique solution? If yes, why? 2
c. What is the opportunity cost of transporting one unit from source S1 to 1
destination D4?
d. How would the cost be affected if it is decided to transport one unit from S2 to 1
D2?
13. A company has four warehouses and five stores. The warehouses have total 10
surplus of 430 units of a given commodity that is divided among them as follows:
Warehouse: W1 W2 W3 W4
Surplus: 150 30 120 130
The five stores have, in all, a requirement of 450 units of the commodity.
Individual requirements are:
Store: S1 S2 S3 S4 S5
Requirement: 80 60 20 210 80
Cost of shipping one unit from the ith warehouse to the jth store is as displayed in
the following table: M in this table indicates that the route is not available.
10
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
Store
Warehouse
S1 S2 S3 S4 S5
W1 9 12 10 10 6
W2 5 18 12 11 2
W3 10 M 7 3 20
W4 5 6 2 M 8
How should the company arrange to transport the units so that the transportation
cost is minimized?
14. The following transportation table shows all necessary information on the
availability of supply to each warehouse, the requirement of each market and the
unit transportation cost from each warehouse to each market:
Markets
Warehouse Supply
P Q R S
A 6 3 5 4 22
B 5 9 2 7 15
C 5 7 8 6 8
Demand 7 12 17 9
The shipping clerk has worked out the following schedule from experience: 12
units from A to Q, 1 unit from A to R, 9 units from A to S, 15 units from B to R, 7
units from C to P and 1 unit from C to R.
a. Check and see if the clerk has the minimum total transport cost. 3
b. Find the optimal schedule and minimum total transportation cost. 4
c. Is there any alternate solution? Give reason. 1
c. If the clerk is approached by a courier to route C to Q, who offers to reduce his 1
rate in the hope of getting some business, by how much the rate should be
reduced that the clerk will offer him the business?
Maximization Problems
11
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
16. A company has four manufacturing plants and five warehouses. Each plant 10
manufactures the same product which is sold at different prices at each
warehouse area. The cost of manufacturing and cost of raw materials are different
in each plant due to various factors. The capacities of the plants are also different.
The data given in the following table:
Plant
Item
1 2 3 4
Manufacturing Cost (Rs.) per unit 12 10 8 7
Raw material cost (Rs.) per unit 8 7 7 5
Capacity per unit time 100 200 120 80
The company has five warehouses. The sales price, transportation costs and
demand are given in the following table:
12
SVKM’S NMIMS ASMSOC OPERATIONS RESEARCH SYBBA/SYBSc (FINANCE)
17. A company has three plants in which it produces a standard product. It has four
agencies in different parts of the country where this product is sold. The
production cost varies from factory to factory and the selling price from market to
market. The shipping cost per unit of the product from each plant to each of the
agencies is known and is stable. The relevant data are given in the following tale:
Weekly production capacity
Plant Unit production cost (Rs)
(units)
1 400 18
2 300 24
3 800 20
Shipping cost (in Rs) per unit:
Agency
Plant
1 2 3 4
1 2 5 7 3
2 8 4 6 2
3 3 4 4 5
Demand (units) 300 400 300 500
Selling Price (Rs) 32 35 31 36
Determine the optimal plan so as to maximize the profits.
19. Discuss and compare the various methods of finding IBFS to a TP. 2
20. What is meant by optimality test? How do you determine whether a given solution 2
is optimal or not?
21. What is unbalanced TP? How will you convert it into a balanced one? 2
23. What is degeneracy in transportation problem? How can we deal with this
problem?
24. In the case of TP, why is it necessary to resolve degeneracy before testing any
basic feasible solution for optimality?
25. How can the transportation method be applied to a TP where objective function is
maximization type?
26. How do you deal with the problem of prohibited route in transportation method?
13