PRODUCTION SCHEDULING BY THE TRANSPORTATION METHOD OF LINEAR PROGRAMMING EDWARD H. BOWMAN School of Instustrial Management, Massachusetts Instuute of Technology, Cambridge, Massachusetts (Received August 11, 1985) With fluctuating sales, a manufacturer must have fluctuating produc- tion, or fluctuating inventory, or both Penalties are associated with either type of fluctuation Several papers place this problem into a con- ventional linear-programming framework This paper suggests that the same problem may be placed into a transportation-method framework and, further, that many transportation problems may be extended to include multiple time periods where this 1s meaningful A generalized scheduling problem 1s placed here into the standard form of the transportation table ANY MANUFACTURING FIRMS have fluctuating sales patterns, particularly on a seasonal basis Fluctuations in sales can be ac- commodated by fluctuations m production or fluctuations in inventory, or by some combination of the two Penalties are associated with either type of fluctuation The problem may be conceived as one of balancing production overtime-type costs with inventory-storage costs to yield a minimum total of these costs This problem has been placed by several papers! ? mto a conventional lmnear-programming framework which may be solved by the Simplex method *: 4 It 1s the purpose of this paper to suggest that the same problem may be placed into a transportation-method framework, and further, that many ‘transportation problems’ may be extended to include multiple time periods where this 1s meaningful Table I shows how the production-scheduling problem may be thrown into the standard form for the transportation method and hence may be solved by this method *:* The values within the table represent the unit cost of ‘shipment’ from the row source to the column destination In effect, each type of production, regular or overtime, in each time pennod as considered a source of supply or mput Each period’s sales requirement 1s considered a destination or output It 1s possible to compute the cost of each possible shipment, which is a combination of production and storage costs Certain cell-routes, marked by dashes, are forbidden since it 18, of course, not possible to produce im one period and sell (and deliver) the unit in a previous period The conventional procedure can be used of assigning a cost M to these cell-routes, representing a very high cost, so 100Production Scheduling by the Transportation Method 101 that, in effect, economic considerations drive out of the solution a ‘ship- ment’ that 1s impossible Though the notation does not indicate it, the production and storage costs for each assignment or cell-route may be unique, 1e , production and storage costs need not be the same for different time periods TABLE I@ Usir Costs oF ‘Suipment” : Sales periods (destination) ‘Total ae ca | 4 | pace M) @ | @ (n) Inventory() | 3 ee Inventory (c)|_ 0 Co (n—)Cr nCt ° g Regular (1) | Ce | Crt+Cr | Cr+2Cr Crt(n—1)Cr) CrtnCy | o § | Overtime (1) | Co | CotCr | Cot2Cr Cot(n—G;| CotnCr | 0 S| Regular (2) | — | Ce CatCr Cat(n—2)C1| Cet(n—Gi} 0 J | Overtime (2) | — Co CotCr | Cot+(n—2)Ci| Co+(n—1)Cy} 0 | Or 5 | Regular(3) | ~ | — Ce Cat(n—3)Ci| Cet(n—2)Ci| 0 | Rs & | Overtime (3) | — _ Co Co+(n—3)C1| Co+(n—2)Cr} 0 | Os = i 8 | B | Regulars) | —| — - Ce | CatCr jo] Re % | Overtime (x) | — ~ = Co | CotCr | 0} On HTotal requirements | Sy Ss Ss Ss. Tn ® ‘© Notation Z,=mventory at the end of the sth time period R,=maximum number of units which can be produced during sth tme period on regular time 0,=maximum number of units which can be produced during sth time period on overtime umber of units of finshed product to be sold (delivered) during sth time period Cp=cost of production per unit on regular time Co=cost of production per unit on overtime Cr=cost of storage per unit per time period Slack total=o+2 R+Z 0-2 S—I, ADVANTAGES THE COMPUTATIONAL ADVANTAGES of the transportation method of hnear programming are fairly well known Practacally, a further advantage 1s that organizations with such a scheduling problem may have some facility with the transportation method, and not with one such as the Simplex method The method can be readily extended to several products Each product in each sales period becomes a separate destination (or column) Sources would remam the same Units of sales and production would,102 Edward H Bowman then, probably be given in hours or other time units, and the appropriate cost of production and storage of an hour’s output avould be used in the computation Possibly the most important point to be made here 1s that many diverse problems now taking the transportation framework may be extended to include time periods For instance, where a number of plants supply a number of warehouses with given requirements, capacities, and costs, some routings become advantageous (as revealed by the conventional transporta- tion method) However, the sales requirements of many firms fluctuate, possibly to different extents in different areas and for different warehouses The question arises as to whether it 1s better to use some of the less costly ‘routes’ during the slack periods and thus incur the associated storage costs, or to use the more costly routes during the peak periods and so save those storage costs The same general methodology presented here can be used in such a problem Each plant im each time period becomes a source, and each warehouse in each time period becomes a destination The appropriate storage or time-period costs are added to the conventional manufacturing and shipping costs in the cost matrix This problem can also be further extended to more than one product. A class at MIT’s School of Industmal Management was given a relatively sample scheduling problem to solve by the general Simplex method, and then by the transportation method The first solution took two to three hours, the second fifteen to thirty minutes Among other reasons, this was due to the fact that in a problem of this type (with almost half of the ‘routes’ forbidden because of impossible time sequences) short cuts and partial solutions by inspection become possible? Though 1t 1s felt that the method has menit, it 1s quite difficult to get meanmngful costs (hneanty?), capaciires (homogeneity?), and requirements (certainty?) Re- search involving the application of this model to several companies n the Boston area 1s currently underway REFERENCES 1 J F Mages, Studies in Operations Research I Application of Lanear Progam- mang to Produchon Scheduling, Arthur D Little, Inc, Cambridge, Mas- sachusetts 2 Joseph O Harrison, Jr, “Linear Programming and Operations Research,” J F McCloskey and F N Trefethen (eds ) Operations Research for Manage- ment, pp 231-33, The Johns Hopkins Press, Baltimore, 1954 3 G_B Danrac, “Maxmuzation of a Linear Function of Variables Subject to Lear Inequalities,” T C Koopmans (ed) Actwty Analysis of Production and Allocation, Cowles Commission Monograph 13, Chap XXI, Wiley, New York, 1951 4 A Cwarnes, W W Cooper, anp A Henperson, An Introduction to Lenear Progamming, Wiley, New York, 1953Production Scheduling by the Transportation Method 103 5 A Cuannes anp W W Coorsr, “The Stepping Stone Method of Explammng Linear Programming Calculations mm Transportation Problems,” Manage- ment Scrence 1, 49-69 (October, 1954) 6 A Hewnperson anp R Scutarer, “Mathematical Programming, Better In- formation for Better Decision Making,” Harvard Business Renew 32, 3 (May- June, 1954) 7 HS Hovrmaxxer, “On the Numerical Solution of the Transportation Prob- lem,” J Opns Res Soc Am 3, 210 (1955)Copyright 1956, by INFORMS, all rights reserved. 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