Transportation problem (One problem and may be one case study)

Transportation problem is a particular class of linear programming, which is associated with day-to-day activities in
our real life and mainly deals with logistics. It helps in solving problems on distribution and transportation of resources
from one place to another. The goods are transported from a set of sources (e.g., factory) to a set of destinations (e.g.,
warehouse) to meet the specific requirements. In other words, transportation problems deal with the transportation of
a single product manufactured at different plants (supply origins) to a number of different warehouses (demand
destinations). The objective is to satisfy the demand at destinations from the supply constraints at the minimum
transportation cost possible. To achieve this objective, we must know the quantity of available supplies and the
quantities demanded. In addition, we must also know the location, to find the cost of transporting one unit of
commodity from the place of origin to the destination. The model is useful for making strategic decisions involved in
selecting optimum transportation routes so as to allocate the production of various plants to several warehouses or
distribution centres.

Suppose there are more than one centres, called ‘origins’ , from where the goods need to be transported to more than
one places called ‘destinations’ and the costs of transporting or shipping from each of the origin to each of the
destination being different and known. The problem is to transport the goods from various origins to different
destinations in such a manner that the cost of shipping or transportation is minimum.

Thus, the transportation problem is to transport various amounts of a single homogenous commodity, which are
initially stored at various origins, to different destinations in such a way that the transportation cost is minimum.

There are 3 main methods to solve a transportation problem: -

1. North west corner rule (NWCR)

2. Least Cost Method (LCM)

3. Vogel’s Approximation method (VAM)

Special cases in transportation problems: -

a) Dummy case (Demand and supply do not tally)

b) Alternate optimal solution (more than one solution)

 c) Prohibited route (stopped routes)

d) Maximisation case (regret matrix case)

e) Case studies ( Half solution given and questions will be asked)

Q1) A company has three factories F1, F2, F3 with production capacities of 11, 13 and 19 units (in thousands). It has4
wahrehousesW1, W2, W3, W4 with demands of 6,10,12 and15 units (In thousands).units cost of transport is given
from each factory to each warehouse. Based on the above information prepare a transport matrix and solve the same
by all 3 methods

To W1 W2 W3 W4
From
F1 42 32 50 26
F2 34 36 28 46
F3 64 54 36 82

Q2) A company has three plans A, B, C for which capacities are 7,10,18 units. It has four warehouses P,Q ,R,S for
which demands are 5,8,7 and 15 units. Unit transportation cost is given in Rs. Find initial feasible solution by VAM

WH P Q R S
Plant
A 38 60 100 24
B 140 60 80 120
C 80 20 120 40

Q3) Supply, demand & unit transportation cost data is given. Find IBFS
To W X Y Supply
From

A 16 24 24 152
B 48 72 48 164
C 24 48 72 154
Demand 144 204 82
Q4) AB Ltd. a chemical company has to plants with daily chemical production of 6 lac and 9 lac litres respectively.
The plants must fulfil the needs of its three distribution centres which have total chemical requirement of 7, 5 and 3
lac litre respectively. The cost of transporting one lac litres of chemical from each plant to each distribution centres is
given in hundreds of rupees given below. Formulate this LPP
 Distribution Centres

Source D1 D2 D3 Supply

Plant 1 2 3 11 6

Plant 2 1 9 6 9

Demand 7 5 3

Q5) Consider the following transportation problems involving minimisation of cost (in Rs,)

a. Find the optimal solution to this problem and determine the total cost of transportation
b. Analysis the solution obtained by you and the answer the following questions.
a. Is the optimal solution unique? Is there is any alternative optimal solution identify?
b. The transport is willing to provide a discount of 25% on the freight on the route S2D4 should the offer
be accepted?
c. How the cost would be affected if it is decided to transport 50units from S2D4.

Q6) A cement company has three factories which manufacture cement which is then transported to four distribution
centres. The quantities of monthly production of each factory, the demand of each distribution centre are the
associated transportation costs per quintal are given as follow:

Distribution Centers

Source D1 D2 D3 D4 Supply

S1 12 6 20 25 400

S2 6 11 15 12 300

S3 9 15 17 7 500

Demand 200 250 350 400

 Q7) A company has three plants and 4 warehouses. The supply and demand in units and corresponding
transportation costs in Rs. per unit are given below. On the basis of past experience, following dispatch
schedule has been finalized.

Warehouses Supply
Capacity
Plants I II III IV
(in units)

A 10 8 5000 7 12 5000

B 12 13 6 4500 10 1500 6000

C 8 7000 10 500 12 14 1500 9000

Demand 7000 5500 4500 3000 20000

Answer the following questions with justification

i) Is the above solution optimal? Find the optimal solution?

ii) Calculate the total minimum transportation cost as per the optimal solution.

If the transport carrier offers 10%discount on route C to iii, should the management accept the offer? Analyse the
optimal solution to find the answer

Q8) A company is spending Rs.1200 on transportation of finished goods from three plants to four distribution
centres every month with unit cost of transportation are given in the following table

Distribution Centers Monthly capacities

D1 D2 D3 D4 (Units)

F1 20 30 50 15 7

F2 70 35 40 60 10

F3 40 12 60 25 18

Demand 5 8 7 15 35
Q9) A company BMS Private limited three plants and four warehouses. The supply and demand in units and the
corresponding transportation cost per unit are given. The table below has been taken from the solution procedure of
the transportation problem
Warehouses

Plants I II III IV Supply

A 4 5 3 6 500

B 3 6 7 3 700

C 1 4 1 2 800

Demand 500 400 900 200

i) Find IFS by VAM method to the above transportation problem.

ii) Test the IFS for optimality and if required Improve it to optimality and calculate minimum total
transportation cost
iii) Is there any alternate optimal solution? Justify
Q10) A glass manufacturing units P1,P2, P3 and P4 producing 5000,8000,7000, and 10000 items per day.
The company has three storage locations. L1, L2 and L3 having capacity for 7.000 9.000 and 18.000 items to
accommodate every day. The transportation cost from factory to storage location in Rs/unit is given in the
following cost matrix
Store Location L1 L2 L3

P1 2 7 4

P2 3 3 1

Factory P3 5 4 7

P4 1 6 2

a) Though the cost of transportation from factory P4 to storage location L1isgiven in the cost matrix, yet this route
cannot be use due to certain operational constrained.
Determined an initial feasible transportation schedule using VAM for the above problems and also calculate the
total transportation cost for this transportation schedule.
Q11) M/s ITC has 3 plants situated at Chennai, Nagpur and Udaipur having monthly manufacturing capacity
of1600 units, 1200 units, and 1700 units respectively. These plants supply finished products to their four
warehouses suited at Mumbai, Delhi, Hyderabad and Kolkata having their monthly demand of 1000 units,1200
units,800 units and 1200 units respectively. The transportation cost per unit (in Rupees) from plants to warehouses
is as follows

Plants Warehouses

Mumbai Delhi Hyderabad Kolkata

Chennai 17 28 15 8

Nagpur 68 14 38 58

Udaipur 38 6 68 18

The shipment from Chennai to Hyderabad and Nagpur to Delhi are not possible due to certain operational
problems. Determined the feasible solution for the above problem by applying VAM and calculate total
transportation cost.

Q12) A company has3 warehouses W1, W2 and W3 from where it supplies products to 3 markets M1, M2 and
M3. Availability at warehouses is 2000,1500 and 1000 units. Market requirements are 1200, 1800, and 1000 units.
Profit potential per unit form each warehouse to each market is as follows

To From Profit per unit (Rs)

M1 M2 M3

W1 25 22 23

W2 15 20 18

W3 18 17 16

Find optimal transportation schedule to maximize total profit

Q13) A company has three warehouses W1 W2 and W3 from where it supplies products to 3 markets M1, M2 and M3.
Availability of warehouses is 2000, 1500 &1000units. Market requirements are 1200,1800, & 1000 units. Profit
potential per unit from each warehouse to each market is as given below:
To Profit per unit (Rs)

From M1 M2 M3

W1 25 22 23

W2 15 20 18

W3 18 17 16

Q14) A company has 3 plants and 3 warehouses. The supply and demand in units and corresponding transportation
cost in Rs. Per unit are given below. On basis of past experience following dispatched schedule has been finalized.
Warehouses Supply
capacity (in
Plan (Transportation cost in Rs/ Units) units)
I II III

A 40(300) 70 90 300

B 12 8(300) 30 (100) 400

C 60 90 45 (200) 200
Demand (In 300 300 300
units)

a) Please improve the above solution to optimality.

b) Study the solution found by you and answer the following questions with justification:

i) Is there and alternate optimal solution?

ii) Find the total minimum transportation costs?

iii) If the route C to II is used by how much amount the total transportation cost would go up for every unit
transported?

iv) What should be the minimum decrease in the unit cost of the cell A-II so that the company will using
this route?
 Concept Questions
1) Why is a non- degenerate solution a prerequisite for optimality test of a transportation solution?

Ans: - To find out the optimal solution to transportation problem, we need to test the available solution for
optimality by MODI (modified distribution) method. This is done by first calculating values of “u” and “v” and
then finding the values of opportunity cost (^) for each empty cell.

But we can calculate values of “u” and “v” if the solution is a degenerate solution and hence, we cannot proceed
further. In that case, to satisfy the test of non-degeneracy, we need to take “epsilon” in the solution.

Hence, a non-degeneracy solution is a prerequisite for optimality test of a transportation solution.

2) What are the various method of finding an initial feasible solution to a transportation problem?

Ans: - there are many methods available to find initial feasible solution to transportation problem. Tree most
commonly used methods are explained below:

A) North West Corner Rule (NCWR): In this method, we start giving allocation fron the first North West
Corner and so on. This is an inefficient method as there is no consideration for minimum cost.
B) Least Cost Method (LCM): In this method, we start allocation from the lowest cost in the table, and then
we proceed to next available lowest cost and so on. This is a better method then NCWR as importance is
given to lower cost and higher allocation cost are avoided.
C) Vogel’s Approximation Methods (VAM): In this method, we calculate penalties for each row and column
in the table. Penalty is a relative difference between two lowest costs for each row and column. Then we
start the allocation from the maximum penalty and corresponding minimum cost. VAM is most often
proved to be the best method as it gives an initial solution which is very near to the optimal solution.

3) Which tests are applied to a transportation solution before we test it for optimality?

Ans: - Following two tests are applied to a transportation solution before we test it for optimality:

a) Test of feasibility:- The solution must be feasible. The total of allocation in each row and column must
match with demand or supply of that row or column.
b) Test of non-degeneracy:- the solution must be non-degenerate i.e. it should satisfy the rim condition. The
number of allocations in the table should be equal to (m+n-1) where, “m” means number of rows “n”
means number of columns. If the solution fails this test, it means it is a degenerate solution. We should
remove the degeneracy by introducing epsilon in the solution.
 4) How to solve unbalanced transportation problem?

Ans: - It is solve using following steps: -

1. First, we balance the problem by introducing a dummy either on supply side or a demand side as necessary.
Profit for dummy row or column will be zero.
2. Then we convert the maximization problem into minimization by converting the profit table into regret
table. To do this, we subtract all profit values (including dummy values) from the maximum profit value
in the table.
3. After converting in minimization, we solve the problem by normal method i.e. finding IFS and then testing
the IFS for optimality and improving it if necessary.
4. When we obtain optimal solution, we multiply each allocation by original profit value to arrive at optimal
profit.

5) How do you detect and find alternate optimal solution (multiple optimal solutions) in a transportation
solution?

Ans: - Alternate optimal solution or multiple optimal solutions mean there are two sets of solutions which
provide the same optimal profit:

1. In the optimal solution to a transportation problem, if there is an empty cell with zero ^ value, it means there
is alternative optimal solution.
2. To find alternative optimal solution, we should construct a closed loop from the empty cell with zero ^. The
new table we obtain after looping is the alternate optimal solution.