TRANSPORTATION

MODELS
LEARNING OBJECTIVES
Identify or define:
 Transportation modeling
 Facility location analysis

Explain or be able to use:

 Northwest-corner rule
 Stepping-stone method
TRANSPORTATION MODELING
Transportation modeling finds the least-
cost means of shipping supplies from
several origins to several destinations.

Key notes in using transportation

modeling:
 The origin points and the capacity or
supply per period at each.
 The destination points and the demand
per period at each.
 The cost of shipping one unit from each
origin to each destination.
CASE STUDY

ABC Inc. is a manufacturer of quality bathtubs. With these

product growing in popularity in the home improvement industry,
the Company wanted to penetrate the U.S. market and quickly
expand its presence in the market place.

The Company opened three (3) production facilities and three (3)
warehouses in selected areas in the country and wants to know
the least-cost means of shipping finished products from
production facilities to warehouses.
TRANSPORTATION PROBLEM OF ABC, INC.

Chicago
(100 units Boston
capacity) (200 units
required)
Albuquerque Cleveland
(300 units (200 units
required) required)

Evansville
Transportation Costs per bathtub for ABC Inc.
(300 units
capacity) To
From Albuquerque Boston Cleveland
Chicago $5 $4 $5
Fort Lauderdale Evansville $8 $4 $8
(300 units Fort Lauderadale $9 $7 $9
capacity)
TRANSPORTATION MATRIX FOR ABC, INC.
To Factory Chicago
From Albuquerque Boston Cleveland capacity
Capacity
constraint
$5 $4 $3
Cell
Chicago 100 representing
$8 $4 $3 a possible
source-to-
Evansville 300
destination
$9 $7 $5 shipping
Fort Lauderadale 300 assignment
(Evansville to
Warehouse
Cleveland)
requirement 300 200 200 700
Total
demand and
Cost of shipping 1 unit total supply.
Cleveland
from Fort Lauderadale warehouse
to Boston warehouse supply.
 NORTHWEST-CORNER RULE
The Northwest-Corner rule requires that we
start in the upper left-handed cell (or
Allocation Procedures:
northwest corner) of the table and allocate
1. Exhaust the supply (factory capacity) of
units to shipping routes.
each row before moving down to the next
row.
To Factory
From Albuquerque Boston Cleveland
Capacity 2. Exhaust the (warehouse) requirements
of each column before moving to the next
$5 $4 $3
Chicago 100 100
column to the right.
$8
$5 $4 $3
3. Check to ensure all supplies and
Evansville 200 100 300
demands are met.
$9 $7 $5
Fort Lauderadale 100 200 300
Warehouse
requirement 300 200 200 700
NORTHWEST-CORNER RULE

Computed Shipping Cost

Route Tubs Cost per Total
From To shipped Unit Cost
Chicago Albuquerque 100 $5 $500
Evansville Albuquerque 200 8 1600
Evansville Boston 100 4 400
Fort Lauderadale Boston 100 7 700
Fort Lauderadale Cleveland 200 5 1000
$4,200
 INTUITIVE LOWEST COST-METHOD
The intuitive method makes initial
allocations based on the lowest cost. Allocation Procedures:
1. Identify the cell with the lowest cost.
Break any ties for the lowest cost
To Factory arbitrarily.
From Albuquerque Boston Cleveland
Capacity
2. Allocate as many units as possible to
$5 $4 $3
that cell without exceeding the supply and
Chicago 100 100
demand. Then cross out that row or
$8
$5 $4 $3
column (or both that is exhausted by this
Evansville 200 100 300
assignment.
$9 $7 $5
Fort Lauderadale 300 300
3. Find the cell with the lowest cost from
Warehouse
the remaining (not crossed out) cells.
requirement 300 200 200 700 4. Repeat steps 2 and 3 until all units have
been allocated.
INTUITIVE LOWEST COST-METHOD

Computed Shipping Cost

Route Tubs Cost per Total
From To shipped Unit Cost
Chicago Cleveland 100 $3 $300
Evansville Boston 200 4 800
Evansville Cleveland 100 3 300
Fort Lauderadale Albuqueque 300 9 2700

$4,100
STEPPING-STONE METHOD
An iterative technique for moving
from an initial feasible solution to an
optimal solution in the transportation
method.

The stepping-stone method is used to

evaluate the cost effectiveness of
shipping goods via transportation
routes not currently in the solution.