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Transportation models play an important role in logistics and

supply chain management for reducing cost and improving
service. Therefore, the goal is to find the most cost effective
way to transport the goods. Transportation problems are
among the most pressingstrategic developmentproblems in
many cities, often a major constraint for long-term urban
development ingeneral, and very closely related to land
development, economicstructure,energypolicies, and
environmental quality. Since all citizens are either enjoying
thetransportation system or, and often at the same time,
suffering from it, it is an important element of the urban quality
of life.
The transportation problems is generally to be solved ,deals
with inefficiency of urban transportation systems and
underlying land use patterns, whichnegatively affect quality of
life, economic efficiency, and the environment; the high(and
often hidden) costs of urban transportation in both socio-
economic andenvironmental terms; and in particular the
environmental consequences both in termsof physical aspects
that include land and resource use, ecological aspects,
andhuman health problems.Efficient tools for comprehensive
strategic analysis that are directly useful to cityadministrations
are lacking. New strategies for sustainable mobility require
wellbalanced combinations of measures with impacts on
 improved land-use/economic development planning;
 improved planning, management and use of transport
infrastructures andfacilities; incorporation of the real
costs of both infrastructure and environment in
investment policies and decisions and also in user costs;
 development of public transport and improvement of its
competitive position ,continued technical improvement of
vehicles and fuels.
 incentives for the use of less polluting fuels; promotion of
a more environmentally rational use of the private car,
including behavioural changes.
These problems can only be addressed with a consistent and
comprehensiveapproach and planning methodology that helps
to design strategies for sustainablecities. This has to include an
integration of socio-economic, environmental andtechnological
concepts including the development, integration,and
demonstration ofmethodologies to improve forecasting,
assessment and strategic policy level decision
Mathematical Model of Transportation Problem
Mathematically a transportation problem is nothing but a
special linear programming problem in which the objective
function is to minimize the cost of transportation subjected to
the demand and supply constraints.
Let ai = quantity of the commodity available at the origin i,
bj = quantity of the commodity needed at destination j,
cij = transportation cost of one unit of a commodity from origin
to destination j,
and xij = quantity transported from origin I to the destination j.
Mathematically, the problem is
Minimize z = ΣΣ xij cij
Σxij = ai, i= 1,2,…..m
Σxij = bj, j= 1,2,…..,n
and xij ≥ 0 for all i and j .
Let us consider an example to understand the formulation of
mathematical model of transportation problem of transporting
single commodity from three sources of supply to four demand
destinations. The sources of supply can be production facilities,
warehouse or supply point, characterized by available capacity.
The destination are consumption facilities, warehouse or
demand point, characterized by required level of demand.


Let P denote the plant (factory) where the goods are being
manufactured & W denote the warehouse (godown) where
finished products are stored by the company before shipping to
various destinations.
Further let, xij = quantity (amount of goods) shipped from
plant Pi to the warehouse Wj, and
Cij = transportation cost per unit of shipping
from plant Pi to the Warehouse Wj.
Objective-function. The objection function can be represented
Minimize Z = c11x11 + C12x12 + C13x13 (i.e. cost of shipping
+ c21x21 + c22x22 + c23x23 from a plant
+ c31x31 + c32x32 + c33x33 to the ware house)
Supply constraints. x11 + x12 + x13 = S1
x21 + x22 + x23 = S2
x31 + x32 + x33 = S3
Demand constraints. x11 + x21 + x31 = D1
x21 + x22 + x23 = D2
x31 + x32 + x33 = D3

Either, xij ≥ for all values of I and j (ie; x11, x12, … all such
values are ≥ 0) .It is further assumed that: S1 + S2 + S3 = D1 +
D2 + D3
The total supply available at the plants exactly matches the
total demand at the destinations. Hence, there is neither excess
supply nor excess demand. Such type of problems where
supply and demand are exactly equal are known as Balanced
Transportation Problem. In general, if a transportation problem
has m rows an n column, then the problem is solvable if there
are exactly (m + n –1) basic variables.
A transportation problem is said to be unbalanced if the supply
and demand are not equal. If Supply < demand, a dummy
supply variable is introduced in the equation to make it equal
to demand ,Likewise, if demand < supply, a dummy demand
variable is introduced in the equation to make it equal to
1 points to note:-
1) Total supply = total demand then it is a balanced
transportation problem, otherwise it is a unbalanced problem.
2) The unbalanced problem can be balanced by adding a
dummy supply center (row) or a dummy demand center
(column) as the need arises.
3) When the number of positive allocation at any stage of
feasible solution is less than the required number (row
+Column – 1) the solution is said to be degenerate otherwise
The solution algorithm to a transportation problem can be
summarized into following steps:
Step 1. Formulate the problem and set up in the matrix form.
The formulation of transportation problem is similar to LP
problem formulation. Here the objective function is the total
transportation cost and the constraints are the supply and
demand available at each source and destination, respectively.
Step 2. Obtain an initial basic feasible solution.
This initial basic solution can be obtained by using any of the
following methods:
2 i. North West Corner Rule
3 It is a simple and an efficient method to obtain an initial
solution.This method does not take into account the cost of
transportation on any route of transportation. This method can
be summarized as follows :
4 Step 1: Start with the cel at the upper left (north-west)
corner of the transportation matrix and allocate as much as
possible equal to the minimum of the rim values for the first
row and first column, i.e. min (a1, b1).
5 Step 2: (a) If allocation made in step 1 is equal to the
capacity of the first source (a1, in first row), then move
vertically downward to the cell (2,1) in the second row and
first column and apply step1 again, for next allocation.
(b) If alcation made in step1 is equal to the first destination
(b1, in first column), then move horizontally to the cell (1,2) in
the first row and second column and apply step1 again for next
(c) If a1 = b1, allocate x11 = a1, or b1 and move diagonally to
the cell (2,2).

Step 3: Continue the procedure step by step till an

allocation is made ion the south-east corner cell of the
transportation table.

6 ii. Vogel Approximation Method

7 Vogel’s approximation Method (penalty or regret method)
is a heuristic method and is preferred to the other two methods
described above. In this method each allocation is made on the
basis of the opportunity (or penalty or extra) cost that would
have incurred if allocation in certain cells with minimum unit
transportation cost were missed. In this method allocations are
made so that the penalty cost is minimized. The advantage of
this method is that it gives an initial solution which is nearer to
an optimum solution or is the optimum solution itself.The steps
in VAM are as follows:
8 Step1: calculate penalties for each (column) by taking the
difference between the smallest and next smallest unit
transportation cost in the same row (column).This difference
indicates the penalty or extra cost which has to be paid if one
fails to allocate to the cell with the minimum unit
transportation cost.
9 Step2: Select the row or column with the largest penalty
and allocate as much as possible in the cell having the least
cost in the selected row or column satisfying the rim
conditions. If there is a tie in the values of penalties then it can
be broken by selecting the cell where maximum allocation can
be made.
10 Step3: Adjust the supply and demand and cross out the
satisfied row or column. If a row and a column are satisfied
simultaneously, only one of them is crossed out and the
remaining row (column) is assigned a zero supply (demand).
Any row or column with zero supply or demand should not be
used in computing future penalties.
11 Step4: Repeat step1 to 3 until the entire available supply
at various sources and demand at various destinations are
13 (iii) Least cost method
Since our abjective is to minimize the total transportation cost ,
we musttry to transport as must as possible through those
routes (cells)where the unit transportation cost is minimum.
This method takes in to account the minimum unit cost and can
be summarized as follows:
Step1:select the cell with the smallest unit cost in the
entire transportation table and allocate as much as possible to
this cell and eliminate (line out )that row or column in which
either supply or demand is exhausted.if both a row and column
are satisfied simultaneously only one may be crossed out .In
case the smallest unit cost cell is not unique ,the then select
the cell where maximum can be made.

Step2:after adjusting the supply and demand for all

uncrossed – out rows and column repeat the procedure with
smallest unit cost among the remaining all rows and column of
the transportation and allocate as much as possible to this cell
and eliminate (line out )that row and column in which either
supply and demand is exhausted.

Step3:Repeat the procedure available until the entire available

supply at various sources and demand at various destination is
satisfied. The solution so abtained need not to be non

The solution obtained by any of the above methods must fulfill

following conditions:
1 i. The solution must be feasible, i.e., it must satisfy all the
supply and demand constraints. This is called RIM CONDITION.
2 ii. The number of positive allocations must be equal to m
+ n – 1, where, m is number of rows and n is number of

The solution that satisfies both the above mentioned conditions

are called a non-degenerate basic feasible solution.
Step 3. Test the initial solution for optimality.
Using any of the following methods can test the optimality of
obtained initial basic solution:
1 i. Stepping Stone Method
2 ii. Modified Distribution Method (MODI)

If the solution is optimal then stop, otherwise, determine a

new improved solution.

Step 4. Updating the solution repeat Step 3 until the optimal

solution is arrived at.
Case : sharma milk products pvt ltd , gujurat , india

A dairy firm has three plants located through out a state .the
daily milk production at each plant is as fol;lows :

Plant 1: 6 hundred litres

Plant 2: 1 hundred litres

Plant 3: 10 hundred litres

Each day the firm must fufil the needs of its four distribution
centres .minimum requirement at each center is as follows :

Distribution centre 1`: 7 hundred litres

Distruibution centre 2: 5 hundred litres

Distruibution centre 3: 3 hundred litres

Distruibution centre 4: 2 hundred litres

Cost of shipping one hundred litres from each plant to

distribution centre is given in the folloing tablr in hundreds
Distribution centres


P1 2 3 11 7

P2 1 0 6 1

P3 5 8 15 9

In the above problem we are going to minimize the cost by

using 3 methods which are as follows:

A)North West Corner Rule

B)Least Cost Method

C)Vogel’s Approximation Method

Solution : (A) North West Corner Rule

Plant D1 D2 D3 D4 SUPPLY

P1 11 6=a1
2 3 7

P2 1=a2
1 0 6 1

P3 8 15 9 10=a3
5 5 3 2

DEMAND 7=B1 5=B2 3=B3 2=B4

1)Comparing a1 and b1. Since a1 < b1; allocate x11 = 6.

This exhaust the supply at p1 and left 1 unit as unsatisfied
demand at d1.

2)Move to cell (p2, d1). Comparing a2 and b1 (i.e. 1 and1).

Since a2 = b1, therefore allocate x21 =1.

3)Move to cell (p3,d2). Since supply at p3= the demand at

d2,d3 and d4, therefore x32 =5,x33 and x34=2.

It may be noted the number of allocated cells (also called

basic cells) are 5 which is 1 less than the required number
m+m-1(3+1-1=6). Thus this solution is the degenerate
The transportation cost associasted with this solution is :

Total cost = Rs. (2x6+1x1+8x5+15x3+9x2)x100

=RS 11600
(B) Least Cost Method

D1 D2 D3 D4 supply

2 3 11 7 6

1 6 1 1

5 8 4 15 3 9 2 10

Demand 7 5 3 2

1)The lowest unit cost 0 is in cell (p2,d2), therefore

maximum possible allocation which can be made here is 1.
This exhausts the supply at planned p2, therefore row2 is
crossed out.

2)The next lowest unit cost is 2 in cell (p1,d1). The

maximum possible allocation which can be made here is 6.
This exhausts the supply at planned p1, therefore row p1 is
crossed out.

3)Since the total supply at p3 is now equal to the unsatisfied

demand at all the four distribution centres, therefore
maximum possible allocation satisfying the supply and
demand conditions are made in cells (p3,d1), (p3,d2),
(p3,d3) and (p3,d4).

The number of allocated cells in this case are 6 which is

equal to the required number, m+n-1(3+4-1=6). Thus this
solution is non degenerate.
The transportation cost associated with this solution is
Total cost= Rs. (2x6+5x1+8x4+15x3+9x2)x100 = Rs.

(C) Vogal’s Approximation Method

D1 D2 D3 D4 Supply row penalty

2 3 11
7 6 1 1 5 -
1 5

1 1 1 1 - - -
0 6

5 8 15 10 3 3 4 4
6 3 9 1
7 5 3 2
1 3 5 6
3 5 4 2
3 - 4 2
5 - 15 9

The number of allocated cell in this case is 6 which is equal to

the required number m+n-1(3+4-1=6), therefore this solution
is nondegenerate. The transportation cost associated with this
solution is

Total cost = Rs. ( 2x1+3x5+1x1+5x6+15x3+9x1)x100

=Rs 10200

It can be seen that the total transportation cost found by VAM

is lower than the cost of transportation determined by the
other two methods. Therefore it is of advantage to use this
method in order to find an initial basic feasible solution.

At last we can conclude that the transportation cost is an

important element of the total cost structure for any business.
In this modern era of hypercompetitive competition, the key
criteria for any business is to achieve high profits and success
by reducing its cost. Hence transportation cost being an
important and major element of the cost structure need to be
reduced (taken care off) to the extent possible.

The above problem of minimizing the transportation cost has

been duly shown in the study, through the use of three
different matters which are NORTH-WEST CORNER RULE, LEAST
which Vogal’s Approximation Method is considered the most
efficient one in minimizing cost. Through the use of these
models a business can identify easily and efficiently how to
plan out its transportation, so that it can not only minimize the
cost of transporting goods and services but also create time
utility by reaching the goods and services at the right place and
at the right time.