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4
C D T U T O R I A L
The MODI and VAM Methods
of Solving Transportation Problems
DISCUSSION QUESTIONS
1. Vogel’s approximation method gives a good initial solution
because it makes each allocation on the basis of the opportunity
cost, or penalty, that would be incurred if that allocation is not
chosen. The northwest corner rule does not take into account the
shipping costs associated with each route alternative as does
VAM. Nevertheless, the northwest corner rule could provide as
low-cost an initial solution—but only if, by chance, it turned out
that the lowest cost routes happened to be on the initially assigned
squares.
2. The major difference between the MODI and stepping-stone
methods is in the procedure used to test for optimality. In the
stepping-stone method, we first draw a closed path for each of the
empty squares to calculate its improvement index. Then, the most
favorable square (i.e., the one with the largest negative index) is
identified. In MODI, however, we first identify the most favorable
square (by using row and column numbers) and then draw a
closed path (only for that path) to direct us in improving the
solution.
END-OF-TUTORIAL PROBLEMS
T4.1 (a) Hardrock’s initial solution using the VAM method is
shown below
Cost 20(\$10) 50(\$4) 50(\$8) 20(\$9) 10(\$6) \$1,040
(b,c) Since this solution is optimal, total cost remains un-
changed at \$1,040.
T4.2 Hardrock’s problem now requires the addition of a dummy
project (destination) because supply exceeds demand. The VAM
initial solution is as follows:
Cost of initial solution 20(\$10) 50(\$4) 50(\$8)
20(\$9) 10(\$6) 30(\$0)
\$1,040
This is the same initial assignment and cost as that found in
Problem T4.1.
The optimal solution, whose total cost is also \$980, is
shown in the following table. An alternate optimal solution
also exists.
T4.3 (a) Using the northwest corner rule for the Saussy Lumber
Company data, the following initial solution is reached:
Initial cost 25(\$3) 5(\$4) 30(\$2) 5(\$3) 30(\$3) \$260
CD TUTORIAL 4 THE MODI AND VAM METHODS OF SOLVI NG TRANSPORTATI ON PROBLEMS 377
(b) Solving the Saussy Lumber Company problem with MODI,
we begin with the same initial solution as found in part
(a) above:
1
1 1 11 1 1
2 1 21 2 2
2 2 22 2 2
2 3 23 3 3
3 3 33 3 3
0
0 3 or 3
3 4 or 1
1 2 or 1
1 3 or 2
2 3 or 1
R
R K C K K
R K C R R
R K C K K
R K C K K
R K C R R

Improvement indices are as follows:

12 12 1 2
13 13 1 3
31 31 3 1
32 32 3 2
Pineville customer 2 3 0 1 2
Pineville customer 3 = 2 0 2 0
best improvement index Mapletown customer 1 = 3 1 3 1
Mapletown customer 2 = 2 1 1 0
I C R K
I C R K
I C R K
I C R K
The final solution is also evaluated using MODI below.
Calculations of the R
i
’s, K
j
’s and improvement indices are
1 1 11 1 1
3 1 31 3 3
1 3 13 3 3
2 3 23 2 2
2 2 22 2 2
0 3 or 3
3 3 or 0
0 2 or 2
2 3 or 1
1 2 or 1
R K C K K
R K C R R
R K C K K
R K C R R
R K C K K

Improvement indices:
12 12 1 2
21 21 2 1
32 32 3 2
33 33 3 3
Pineville – customer 2 3 0 1 2
Oak Ridge – customer 1 = 4 1 3 0
Mapletown – customer 2 = 2 0 1 1
Mapletown – customer 3 = 3 0 2 1
I C R K
I C R K
I C R K
I C R K

Final solution with R
i
and K
j
values:
378 CD TUTORIAL 4 THE MODI AND VAM METHODS OF SOLVI NG TRANSPORTATI ON PROBLEMS
T4.4 Krampf Lines Railway Company’s initial northwest corner
solution is shown below.

Initial solution’s total cost 30(50 miles) 5(30 miles)
40(80 miles) 20(10 miles)
5(80 miles) 20(30 miles)
6, 050 car-miles
To test for improvement with MODI, we set up an equation
for each occupied square:
1
1 1 1 1
1 2 2 2
2 2 2 2
2 3 3 3
3 3 3 3
3 4 4 4
0
50 0 50 or 50
30 0 30 or 30
80 30 80 or 50
10 50 10 or 40
80 40 80 or 120
30 120 30 or 90
R
R K K K
R K K K
R K R R
R K K K
R K R R
R K K K

13 13 1 3
14 14 1 4
21 21 2 1
24 24 2 4
31 31 3 1
32 32 3
index 60 0 ( 40) 100
index 70 0 ( 90) 160
index 20 50 50 80
index 90 50 ( 90) 130
index 100 120 50 70
best improvement index index
C R K
C R K
C R K
C R K
C R K
C R K
2
40 120 30 110
Second Krampf solution—cost 5,500 miles:
1
1 1 1
1 2 2
2 2 2
2 3 3
3 2 3
3 4 4
0
50 50
30 30
80 50
10 40
40 10
30 20
R
R K K
R K K
R K R
R K K
R K R
R K K

CD TUTORIAL 4 THE MODI AND VAM METHODS OF SOLVI NG TRANSPORTATI ON PROBLEMS 379

13 13 1 3
14 14 1 4
21 21 2 1
24 24 2 4
31 31 3 1
33 33 3 3
index 60 0 ( 40) 100
index 70 0 20 50
best improvement index index 20 50 50 80
index 90 50 20 20
index 100 10 50 40
index 80 10 (
C R K
C R K
C R K
C R K
C R K
C R K 40) 110
Third and optimal Krampf solution 3,100 miles:
T4.5 Jessie Cohen Clothing Group’s first VAM assignment table:
In the initial assignment table above, we see that the Z row has
the greatest difference (3). We assign the minimum possible
number of units (50) to the least-cost route (Z B) in that row.
Second VAM assignment with B’s requirement satisfied:
This second VAM table (above) indicates that the greatest differ-
ence is now in the B column (4). We may assign up to 15 units to
the W B square without exceeding the demand at store B.
380 CD TUTORIAL 4 THE MODI AND VAM METHODS OF SOLVI NG TRANSPORTATI ON PROBLEMS
Third VAM assignment with W’s requirement satisfied:
The third VAM table involves assigning 20 units to the W C route.
This is done because column C has the highest difference and square
W C the lowest cost in that column.
Final assignment for Cohen Clothing Group:
The final assignment (above) is made by completing the row and
column requirements. This means that 30 units must be assigned to
Y A and 20 units to Y C.
The total cost of this VAM assignment:
(15 units \$3) (20 units \$3) (30 units \$6)
(20 units \$6) (50 units \$2) \$505.
A quick check using the stepping-stone index method indicates that
this VAM solution is also optimal.
T4.6 (a) VAM steps are as follows:
Assign 30 units to C W (the W column has the greatest difference, 7) and place
X’s in all other row C squares.
Assign 20 units to B X.
Assign 10 units to B W.
Assign 20 units to A Z.
Assign 35 units to A Y and 15 units to B Y.
Total VAM cost 35(9) 20(5) 10(8) 20(1)
15(6) 30(1) 635
CD TUTORIAL 4 THE MODI AND VAM METHODS OF SOLVI NG TRANSPORTATI ON PROBLEMS 381
(b) MODI technique to test for optimality:
1
1 3 3
1 4 4
2 3 2
2 1 1
2 2 2
3 1 3
0
9 9
5 5
6 3
8 11
1 4
1 10
R
R K K
R K K
R K R
R K K
R K K
R K R

11 11 1 1
12 12 1 2
24 24 2 4
32 32 3 2
33 33 3 3
34 34 3 4
_ _ _ _
index = =12 0 11= +1
_ _ _ _
index = = 4 0 4 = 0
_ _ _ _ _
index = = 6 ( 3) 5 = +4
_ _ _ _ _
index = =12 ( 10) 4 = +18
_ _ _ _ _
index = = 4 ( 10) 9 = +5
_ _ _ _ _
index = = 7 ( 10) 5 = +
C R K
C R K
C R K
C R K
C R K
C R K 12
Because all improvement indices are zero or
positive, this solution is optimal. An alternative
optimal solution, however, is A X 20,
A Y 15, A Z 20, B W 10, B Y 35,
C W 30, cost \$635.