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    218 Learning objectives After completing this chapter, you should be able to 1, Describe the characteristics of transportation problems. 2, Formulate a spreadsheet model for a transportation problem from a description of ‘the problem. 3. Do the same for some variants of transportation problems. 4. Give the name of two algorithms that can solve huge transportation problems that are well beyond the scope of the Excel Solver. 5. Identify several areas of application of transportation problems and their variants. 6, Describe the characteristics of assignment problems. 7. Identify the relationship between assignment problems and transportation problems, 8, Formulate a spreadsheet model for an assignment problem from a description of the problem. 9. Do the same for some variants of assignment problems. 10. Give the name of an algorithm that can solve huge assignment problems that are ‘well beyond the scope of the Excel Solver Transportation and Assignment Problems You have seen in the preceding chapters just how useful linear programming can be to an en- lightened manager in dealing with a wide variety of problems, You will continue to broaden ‘yout horizons in this chapter about the breadth of applicability of linear programming. The fo- cus will be on two related special types of linear programming problems that are so important that they have been given their own names, namely, ransportation problems and assignment problems. Both fall into the third category of linear programming problems introduced in Chapter 4—distribution-network problems, ‘Transportation problems received this name because many of their applications involve de- \ termining how to transport goods optimally. However, you will see that some of their impor- tant applications have nothing to do with transportation, Assignment problems are best known for applications involving assigning people to tasks. However, they have a variety of other applications as wel Following a case study, the initial sections of this chapter describe the characteristics of transportation problems and their variants, illustrate the formulation of spreadsheet models for such problems, and survey a variety of applications. The subsequent sections then do the same for assignment problems. 6.1 A CASE STUDY: THE P & T COMPANY DISTRIBUTION PROBLEM Douglas Whitson 1s concerned. Costs have been escalating and revenues have not been keep- ing pace. Ithis tend continues, shareholders are going to be very unhappy with the next earn- ings report. As CEO of the P & T Company, he knows that the buck stops with him. He's got to find a way to bring costs under control Douglas suddenly picks up the telephone and places a call to his distribution manager, Richard Powers. Douglas (CEO): Richard. Douglas Whitson here. | Richard (distribution manager): Hello, Douglas. Douglas: Say, Richard. I've just been looking over some cost data and one number jumped out at me, Richard: Oh? What's that? Douglas: ‘The shipping costs for our peas. $178,000 last season! I remember it running under $100,000 just a few years ago. Whats going on here? Richard: Yes, you're right. Those costs have really been going up. One factor i that our shipping volume is up a litle. However, the main thing i that the fees charged by the truckers we've been using have really shot up. We complained. They said something about their new contract with the union representing ther divers pushed their costs up substantially. And their insurance costs are up 29 ee © 220. Chapter Six There isa technique for generating a shipping plan that minimizes the total jpmaton and Asien Problems Douglas: Have you looked into changing truckers? Yes. In fact, we've already selected new truckers for the upcoming growing Good. So yout shipping costs should come down quite abit next season? Richard: Well, my projection is that they should run about $165,000, Douglas: Ouch. That’ still 00 heh. Richard: That seems tobe the best we can do, Douglas: Well, let's approach this from another angle. You're shipping the peas from our three canneries to all four of our warehouses? Richard: Thats right Douglas: How do you decide how much each cannery will ship to cach warehouse? We have a standard strategy that we've been using for many years. Does this strategy minimize your total shipping cost? I think it does « pretty good job of that But does it use an algorithm to generate a shipping plan that is guaranteed to minimize the total shipping cost? Richard: No, can’t say it does that. Is there a way of doing that? Douglas: Yes. [understand there is a management science technique for doing that. Ths is something I learned when I interviewed that new MBA. graduate we hired last tmouth, Kin Baker. Kim thought this technique could be directly applicable to our company. We hired Kim to help us incorporate some of the best techniques being taught in business schools these days. I think we should have Kim look at ‘your shipping plan and see if she ean improve upon it Richard: Sounds reasonable, Douglas: OK, good. I would like you to coordinate with Kim and report back to me soon, Richard: Will do. The conversation ends quickly, Background ‘The P & T Company is a small family-owned business. It receives raw vegetables, proce and cans them at its canneries, and then distributes the canned goods for eventual sale, One of the company’s main products is canned peas, The peas are prepared at three neries (near Bellingham, Washington; Eugene, Oregon: and Albert Lea, Minnesota) and then shipped by truck to four distributing warehouses in the western United States (Sacramento, California; Salt Lake City, Utah; Rapid City, South Dakota; and Albuquerque, New Mexico), as shown in Figure 6.1 The Company's Current Approach For many years, the company has used the following strategy for determining how much out put should be shipped from cach of the canneries to meet the needs of each of the warehouses, Current Shipping Strategy 1. Since the cannery in Bellingham is furthest from the warehouses, ship its output to its near- est warehouse, namely, the one in Sacramento, with any surplus going to the warehouse in Salt Lake City. 6.41 A Case Study The P & T Company Dieibucion 2, Since the warchouse in Albuq from the canneries lerque is Furthe ave its nearest canner (the one in Albert Lea) ship its output to Albuquerque, with any surplus house in Rapid City fo the ware 3. Use the cannery in Eugene to supply the remaining needs of the warehouses For the upcoming harvest season, an estimate has been made of the output from each can nery, and each warehiouse has been allocated a certain amount from the total supply of peas, This information is given in Table 6.1 Applying the current shipping strat shown in Table 6.2. The shippin Table 6.3. to the data in Table 6.1 gives the shipping plan costs per truckload for the upcoming season are shown in FIGURE 6.1 Le and warehouses for the P&T Co, problem. sation of the canner i Warehouse 3 ie \ Warehouse aa 7 j | | 3 Je | y f TABLE 6.1 Cannery ‘Output Warehouse Allocation TABLE 6.2 Warehouse cas for the P & T Co, To From Sacramento _Salt Lake City Rapid city Albuquerque Chapter Six Transporation and Asinment P Shipping Costs per ‘Truckload for the PETC. “Terminology for a Transportation Problem ‘Warehouse To Fro Sacramento Salt Lake City —_—Rapid City Alhuquerque cannery Bellingham $464 $513 867 Eugene 352 416 79) Albert Lea 995 682 685 Combining the data in Tables 6,2 and 6.3 yields the total shipping cost under the curren, plan for the upcoming season: Total shipping cost = 75(S464) + ($352) + 65(S416) + 55($690) + 15($388) + 85(S685) = $165,595 Kim Baker now is reexamining the current shipping strategy to see if she can develop a new shipping plan that would reduce the total shipping cost to an absolute minimum, The Management Science Approach Kim immediately recognizes that this problem is just a classic example of a transportation problem. Formulating the problem in this way is straightforward. Furthermore, software is readily available for quickly finding an optimal solution on a desktop computer, This enab Kim to return to management the next day with a new shipping plan that would reduce the to tal shipping cost by over $13,000. This story will unfold in the next section after we provide more background about trans portation probleme. 1. Whats the specific concern being raised by the CEO of the P &T Co. in this case study? 2. What is Kim Baker being asked to do? The Model for Transportation Problems ‘To describe the model for transportation problems, we need to use terms that are consi less specific than for the P & T Co. problem. Transportation problems in general ate cone (literally or figuratively) with distributing any commodity from any group of supply centes, called sources, to any group of receiving centers, called destinations, in such a way as to mit imize the total distribution cost, The correspondence in terminology between the specific ap~ plication to the P & T Co. problem and the general model for any transportation problem is summarized in Table 6.4 ‘As indicated by the fourth and fifth rows of the table, each source has a certain supply of ‘units to distribute to the destinations, and each destination has a certain demand for wits 0 ab ned P&T Co, Problem Truckloads of canned peas Canneries Warehouses Output from a cannery Allocation to a warehouse Shipping cost per truckload from a cannery to a warehouse General Model Units of a commodity Sources Destinations Supply from a source Demand at a destination Cost per unit distributed from a source to a destination rr _ 62 isis of Transporation Problems 223 ranspottation problem be received from the sources, The model for a transportation problem makes the following as- sumption about these supplies and demands. supplies from sour {Phe Reawirements Assumption: Each source has fixed supply of units, where this entire supply must be distributed tothe destinations. Similarly, each destination has a fixed demand for ‘units, where this entre demand must be received from the sources ‘This assumption that there is no leeway in the amounts to be sent or received means that there needs to be a balance between the total supply from all sources and the total demand at all destinations, ‘The Feasible Solutions Property: A transportation problem will have feasible solution if and only ifthe sum of ts supplies equals the sum of its demands, Fortunately, these sums are equal for the P & T Co, since Table 6.1 indicates that the supplies (outputs) sum to 300 truckloads and so do the demands (allocations) In some real problems, the supplies actually represent maximum amounts (rather than fixed amounts) to be distributed, Similarly, in other cases, the demands represent maximum amounts (cather than fixed amounts) to be received. Such problems do not fit the mode! for a trans portation problem because they violate the requirements assumption, so they are variants of a The next section will Jesctibe how some seid formulated. Wansportation problem. Fortunately, its relatively straightforward to formulate a spreadsheet nd solved. model for such variants that the Excel Solver can stil solve, as will be illustrated in Section 6.3, ‘The last row of Table 6.4 refers to a cost per unit distributed. This reference to a unit cost implies the following basic assumption for any transportation problem, The Cost Assumption: The cos of distributing units from any particular source to any partic ular destination is directly proportional othe numberof wits distributed. Therefor, this cos is just the unit cost of distribution mes the number of units distributed The supplies, demands, The only data needed fora transportation problem model are the supplies, demands, and unit and unit costs provide all costs, These are the parameters of the model. All these parameters for the P & T Co. problem the data for«tansports~ are shown in Table 6.5. This table (including the description implied by its column and row ‘ion problem, headings) summarizes the model forthe problem. "The Model: Any problem (whether involving transportation or not) fits the model fora trans portation problem ifit 1) can be described completely in terms ofa table like Table 6.5 that identifies all the sources, destinations, supplies, demands, and unit eosts, and (2) satisfies both the requirements assumption and the cost assumption. The objective isto minimize the total cost of istibuting the units ‘Therefore, formulating a problem as a transportation problem only requires filling out a table in the format of Table 6.5, Its not necessary to write out a formal mathematical model (even though we will do this for demonstration purposes later). ‘The Big M Company distribution-network problem presented in Section 4.4 is another ex- ample of a transportation problem. In this example, the company's two factories need to ship TABLE 6.5 The Data for the P & T Co, Problem Formulated as 2 Transportation Problem Destination (Warehouse): Sacramento Salt Lake City Rapid City Albuquerque Supply Source (Cannery) Bellingham $464 $513 $658 $867 78 Eugene 352 416 690 791 125 Albert Lea 995, 682 388 685, 100 Demand 80 65 70 85 224 Chapter Six Tiansporaion and Assignment Problems FIGURE 6.2 A spreadsheet formulation of the P & T Co. problem as a transportation problem, including the target (G17) ant he other ostput the model. The changing. turret lathes to three customers and the objective is to determine how to do this $0 a8 to min, mize the total shipping cost. Table 4.5 presents the data for this problem in the same format ay ‘Table 6.5, where the factories are the sourees, their outputs are the supplies, the custome a the destinations, and their order sizes are the demands. . Using Excel to Formulate and Solve Transportation Problems Section 4.4 describes the formulation of the spreadsheet model for the Big M Company prob Jem, We now will do the same for the P & T Co. problem. The decisions to be made are the number of truckloads of peas to ship from each cannery to each warehouse. The constraints on these decisions are that the total amount shipped from cach cannery must equal its output (the supply) and the total amount received at each ware house must equal its allocation (the demand). The overall measure of performance is the (ota shipping cost, so the objective is to minimize this quantity ‘This information leads to the spreadsheet model shown in Figure 6.2. All the data provided in Table 6.5 are displayed in the following data cells: UnitCost (D5:G7), Supply (J12:514), and ell TotalCost ‘3 wall ao the epecificatione noodod to eet juantity (D12:G14) show the optimal shipping plan obtained by the Solver. lly TotelShipped (1112:1114) and TotalReccived (D15:G ls Shipment aL # c D i E @ Bist 1 1_[ P87 Go, Distribution Problem 3 Unit Cost | Destination (Warebous) = 4 Socramento [Sat Lake Ci Rapid iy Atbaquergpe | _ S| | Souce | Bellingham = 6h= S513. S82 SHY — | 6 (Cannery) | Eagene si Sle Som 7 Albert Lea ee 8 _ f 3 - 10 | [shipment Quant Destination (Warcouss) TL | | crruckones) Sacramento [Sat Lake Ci] Rapid City [ Abuguorque | Tol Shipped 2 ‘Souce[Baingham [0 2 ° ss 5 iB (Cooney) | Bagene “0 “s ° ° roman etl rm ‘Albert Len ° ° 10 30 10 [= 10 15 Total Received _[ 80 S 70 s 16 S E 17 Lo s 0 ss Solver Parameter Soiver option: Range Name cat Baer een Liner) oan] | M Hote. Over @rn Amswnetertentie | Siomceaniy pias} | By Changing Celts: TetlCost | alesis 4 Branca ‘ashe! ‘la Subject to the Constraints eae rae Fatatocaved = Demand [etlshipped = Supply c D E F | 15, | Toa Received MDI | —SUMEIREL | -SUM@IARA | =sUMORGI | 16 Tal Cost 17_ | -SUMPRODUCTIUAitCes ShipmenQusni) column labels fr ables, The constraints a pecified next to the Transportation prob area special type of network-distibution FIGURE 6.3 The network representation of the P&T Co. transportation problem shows all the data in Table 65 graphically. 6.2. Chaacseristis of Tanspertation Problem Demand (D17:G17). The decisions on shipping quantities are given by the changing cells, ShippingQuantity (D12:G14). The output cells are TotalShipped (HI2:HI4) and Total Received (D15:G15), where the SUM functions entered into these cells are shown near the bowom of Figure 6.2. The constraints, TotalShipped (HL12:HLL4) = Supply (112:114) and otal Received (D15:G15) = Demand (D17:G17), have been specified on the spreadsheet and en. teted info the Solver dialogue box. The target cell is TotalCost (J17), where its SUMPROD- UCT function is shown in the lower right-hand corner of Figure 6.2. The Solver dialogue box. specifies that the objective is to minimize this target cell. One of the selected Solver options (Assume Non-Negative) specifies that all shipment quantities niust be nonnegative, The other ‘one (Assume Linear Model) indicates that this transportation problem is also a linear pro- gramming problem (as deseribed later in this section). To begin the process of solving the problem, any value (such as 0) can be entered in each of the changing cells. After clicking on the Solve button, the Solver will use the simplex ‘method to solve the transportation problem and determine the best value for each of the deci sion variables. This optimal solution is shown in ShippingQuantity (D12:G14) in Figure 6.2, along with the resulting value $152,535 in the target cell TotalCost (17) The Network Representation of a Transportation Problem A nice way to visualize a transportation problem graphically is to use ito nonwork representa ‘ion, This representation ignores the geographical layout of the sources and destinations. [n- stead, it simply lines up all the sources in one column on the left (where 5; is the symbol for Source I, etc.) and all the destinations in one column on the right (where D, is the symbol for Destination 1, ete.). Figure 6.3 shows the network representation of the P & T Co, problem, here the numbering of the sources (canneries) and destinations (warehouses) is that given in Figure 6.1. The arrows show the possible routes for the truckloads of canned peas, rnumber next to each arrow is the shipping cost (in dollars) per truckload for that route. Since the figure also includes the supplies and demands, It Includes all the data provided by Table 6.5. Therefore, this network representation provides an alternative way of summarizing the model for a transportation problem model Since the Big M Company problem presented in Section 4.4 also isa transportation prob- Jem, it too has a netwotk representation like the one in Figure 6.3, as shown in Figure 4.4 For transportation problems larger than the P & T Co, problem, itis not very convenient (0 draw the entire network and display all the data, Consequently, the network re mainly a visualization device. Recall that Section 4.4 described distribution-network problems as a major category of lin- ear programming problems that involve the distribution of goods throu work. The networks in both Figure 4.4 and Figure 6.3 are a simple type of distribution network here the entation is ‘a distribution net- Demands Supplies 7 On *(‘Dg) 85 (Albuquerque) 4) NS Se ———— ——_—_— SS chapter Six Transp Assigmnen Probems where every shipping lane goes directly from a source to a destination. Consequently, trans portation problems are a special type of distribution In Chapter 7. you will see many more network representations of other distribution-network problems. work problem. The Transportation Problem Is a Linear Programming Problem To demonstrate that the P & T Co. problem (or any other transportation problem) is, in fact, a linear programming problem, let us formulate its mathematical model in algebraic form. Using the numbering of canneries and warehouses given in Figure 6.1, let xy be the num bor of truckloads to be shipped from Cannery i to Warehouse j for each i = 1,2, 3 and j = 1 23,4. The objective is to choose the values of these 12 decision variables (the x,) 50 as to Minimize Co 64x, + S12 + 654K 3 + BOT + 35209) + 416%» + 690%35 4 T9Lry4 + 995851 + 6Bxy2 + 3BRL55 + OBS subject to the constraints xy twa tx + Me 15 aay} ag! say | 24 Ls x +m Xs ten tru = 85 and 0 @=1,2,3;/=1,2,3,4) This is indeed a linear programming problem ‘The P & T Co, always ships ful truckloads of canned peas since anything less would be un- ‘economical. This implies that each x, should have an integer value (0,1, 2,...). To avoid obtain- ing an optimal solution for our model that has fractional values for any of the decision variables, ‘we could add another set of constraints specifying that each x, must have an integer value. 1his ‘would convert our linear programming problem into an integer programming problem, which is more difficult to solve. (We will discuss integer programming problems in Chapter 9.) Fortunately, this conversion is not necessary because of the following property of transportation problems. Integer Solutions Property: As long a all its supplies and demands have integer values, any ‘ransportation problem with feasible solutions is guaranteed to have an optimal solution with intoger values forall its decision variables. Therefore, itis not necessary to add constraints to the mux dhl 1essiet these variables to only have integer value ‘When dealing with transportation problems, practitioners typically do not bother to write cout the complete linear programming model in algebraic form since all the essential informa- tion can be presented much more compactly in a table like Table 6.5 or in the corresponding spreadsheet model Before leaving this linear programming model though, take a good look atthe left-hand side of the functional constraints, Note that every coefficient is either 0 (so the variable is deleted) or 1. Also note the distinctive pattern forthe locations of the coefficients of I, inelading the fact that each variable has a coefficient of 1 in exactly two constraints. These distinctive features of the coefficients play a key role in being able to solve transportation problems extremely efficiently. Solving Transportation Problems Because transportation problems are a special type of linear programming problem, the be solved by the simplex method (the procedure used by the Excel Solver to solve linear pro- ork simplex method be used fo solve huge ansportation problems sed by the Excel Solver seemed 1 be the best one available, solving the Spreadsheet model the total shipping by about & 6.2. Characters of Teanyporaion Problems 227 ‘gramming problems), However, because of the very distinctive pattern of coefficients in its functional constraints noted above, itis possible to greatly streamline the simplex method to solve transportation problems far more quickly. This streamlined version of the simplex method is called the transportation simplex method. It sometimes can solve large trans- portation problems more than 100 times faster than the regular simplex method. However, itis ‘only applicable to transportation problems. Just like a transportation problem, other distribution-network problems also have a similar distinctive pattern of coefficients in their functional constraints. Therefore, the simplex method can be greatly streamlined in much the same way as for the transportation simplex ‘method to solve any distribution-network problem (including any transportation problem) very uickly. This streamlined method is called the network simplex method. Linear programming software often includes the network simplex method, and may include the transportation simplex method as well. When only the network simplex method is avail- able, it provides an excellent alternative way of solving transportation problems. In fact, the network simplex method has become quite competitive with the transportation simplex ‘method in recent years After obiaining an optimal solution, what-if analysis generally is done for transportation problems in much the same way as described in Chapter 5 for other linear programming prob- lems. Either the transportation or network simplex method ean readily obtain the allowable range for each coefficient in the objective function, Dealing with changes in right-hand sides (supplies and demands) is more complicated now because of the requirement that the sum of the supplies must equal the sum of the demands. Thus, each change in a supply must be ac- companied by a corresponding change in a demand (or demands), and vice versa, Because the Excel Solver is not intended to solve the really large linear programming prob- lems that often arise in practice, it simply uses the simplex method to solve transportation problems as well as other distribution-network problems encountered in this book (and con- siderably ger ones as well), so We will Continue to use the Solver (or Premium Solver) and thereby forgo any use of the transportation simplex method or network simplex method. Completing the P & T Co. Case Study ‘We now can summarize the end of the story of how the P & T Co, was able to substantially ime prove on the current shipping plan shown in Table 62, which has atta shiping cost of $165,595 ‘You already have seen how Kim Baker was able to formulate this problem as atranspor tion problem simply by filling out the table shown in Table 6.5. The corresponding formula- tion on a spreadsheet was shown in Figure 6.2. Applying the Solver then gave the optimal so- lution shown in ShipmentQuantity (D12:G14). Note that this optimal solution is not an intuitive one. Of the 75 truckloads being supplied by Bellingham, 55 of them are being sent to Albuquerque, even though this is far more ex- pensive ($867 per truckload) than to any other warehouse, However, this sacrifice for Cannery 1 enables low-cost shipments for both Canneties 2 and 3. Although it would be difficult o find this optimal solution manually, the simplex method in the Excel Solver finds it readily. ‘As niven in the target cell TotalCost (117), the total shipping cost for this optimal shipping plan is ‘Total shipping cost = 20($513) + 55($867) + 80(S352) + 45(8416) + 70($388) + 30(8685) = $152,535 ‘reduction of $13,060 from the current shipping plan, Richard Powers is pleased to report this reduetion to his CEO, Douglas Whitson, who congratulates him and Kim Baker for achieving this significant savings. An Award-Winning Application of a Transportation Problem Except for its small size, the P & T Co. problem is typical of the problems faced by many cor= porations that must ship goods from their manufacturing plants to their customers. For example, consider an award-winning management science study conducted at Procter & Gamble (as described in the January-February 1997 issue of lnerfaces). Prior to the study 228 Chapter Six Tyanportaton and Asien Problems savings of over $200 million per year wer achieved Review Questions 6.3 MODELING Spreadsheet models problems because the above features can solved by the Excel Solve the company’s supply chain consisted of hundreds of suppliers, aver 50 product categories, ‘over 60 plants, 15 distribution centers, and over 1,000 customer zones. However, a the com pany moved toward global brands, management realized that it needed to consolidate plats reduce manufacturing expenses, improve speed to market, and reduce capital investment ‘Therefore, the study focused on redesigning the company’s production and distribution system, for its North American operations. The result was a reduction in the number of North Amer can plants by almost 20 percent, saving over $200 million in pretax costs per year. AA major patt ofthe study revolved around formulating and solving transportation problems for individual product categories. For each option regarding the plants to keep open, and sofort, solving the corresponding transportation problem for a product category shows wiat the dst bation cost would be for shipping the product category fom those plants to the distribution cen- ters and customer zones. Numerous such transportation problems were solved in the process of identifying the best new production and distibution system. (The article describing this appli cation of management science can be downloaded at wwwanhhe.con/hilier2e/articles.) Give a one-sentence description of transportation problems. What data are needed for the model of a transportation problem? 1 2 3. What needs to be done to formulate a problem as a transportation problem? 4, What is required for a transportation problem to have feasible solutions? 5. Under what circumstances will a transportation problem automatically have an optimal solution ‘with integer values forall its decision variables? Name two algorithms that can solve transportation problems much faster than the general sim plex method VARL ‘The P & T Co. problem is an example of a transportation problem where everything fits im- mediately. Real life is seldom this easy. Linear programming problems frequently arise that are «almost transportation problems, but one or more features do not quite fit, Here are the features that we will consider in this section, 1. The sum of the supplies exceeds the sum of the demands, so each supply represents a ma imum amount (not a fixed amount) to be distributed from that somree 2, The sum of the supplies is fess than the sum of the demands, so each demand represents 3 ‘maximum amount (not a fixed amount) to be received at that destination, 3. A destination has both a minimum demand and a maximum demand, so any amount between these two values can be received, 4. Certain source-destination combinations cannot be used for distributing units, 5. The objective is to maximize the total profit associated with distributing units rather thon to minimize the total cost. For each of these features, itis possible to reformulate the problem in a clever way to make it fit the format for transportation problems. When this is done with a really big problem (say, one with many hundreds or thousands of sources and destinations), it is extremely helpful be- cause either the transportation simplex method or network simplex method can solve the prob- Jem in this format much faster (pethaps more than 100 times faster) than the simplex method can solve the general linear programming formulation, However, when the problem is nof really big, the simplex method still is capable of solving the general linear programming formulation in a reasonable period of time. Therefore, a basic sofiware package (such as the Excel Solver) that includes the simplex method but not the trans- portation simplex method or network simplex method can be applied to such problems with- ‘out trying to force them into the format for a transportation problem. This is the approach Data for the Bettor Products Co. Problem The Data for the Better Products Co. Problem Formulated as a Variant of a Transportation Proble 6.3 Madang Varios of Fansportion Pobens 229 will use, In particular, this section illustrates the formulation of spreadsheet models for vari ants of transportation problems that have some of the features listed above. ‘Our first example focuses on features | and 4, A second example will illustrate the other features, Example 1: Assigning Plants to Products ‘The Better Products Company has decided to initiate the production of four new products, us- ing three plants that currently have excess production capacity. The products require a compa rable production effort per unit, so the available production capacity of the plants is measured by the number of units of any product that can be produced per day, as given in the rightmost ‘column of Tahle 6.6. The hottom row gives the required production rate (number of units pro- duced per day) to meet projected sales. Each plant can produce any of these products, except that Plant 2 cannot produce Product 3. However, the variable costs per unit of each product dif fer from plant to plant, as shown in the main body of the table. Management now needs to make a decision about which plants should produce which prod- ucts. Product splitting, where the same product is produced in more than one plant, is petmit- ted, (We shall return to this same example in Section 6,7 to consider the option where product splitting is prohibited, which requires a different kind of formulation.) Formulation of a Spreadsheet Model ‘This problem is almost a transportation problem. In fact, after substituting conventional ter- minology (supply, demand, ete.) for the column and row headings in Table 6.6, this table cally fits the formulation for a transportation problem, as shown in Table 6,7. But there are two \ways in which this problem deviates from a transportation problem. One (minor) deviation is that a transportation problem requires a unit cost for every souree-destination combination, but Plant 2.cannot produce Product 3, so no unit cost is avail- able for this particular combination, The other deviation is that the sum of the supplies (75 + 75 + 45 = 195) exceeds the sum of the demands (20 + 30 + 30 + 40 = 120) in Table 6.7. Thus, asthe feasible solutions property ‘Section 6.2) indicates, the transportation problem rep- resented by Table 6.7 would have no feasible solutions. The requirements assumption (Section 6.2) specifies thatthe entire supply from each source must be used. Unit Cost api Product: 1 2 3 4 ble Plant 1 sat 327 $28 $24 75 2 40 29 23 15 3 37 30 27 2 45 Required production 20 3 30 40 Unit Cost Destination (Product): 1 2 3 4 Supply Source (Plant) 1 sat 327 sze 34 2 2 40 29 7 23 5 3 37 30 27 2 45 Demand 20 30 30 40 230 Chapter Six Transport FIGURE 6.4 A spreadshe the target cell TotalCost (116 fications needed to set by the Solver. ction an Assignment Problems In reality, these supplies in Table 6.7 represent production capacities that will not need to be fully used to meet the sales demand for the products. Thus, these supplies are upper bound ‘on the amounts to be used, ‘The spreadsheet model for this problem, shown in Figure 6.4, has the same format as the ‘one in Figure 6.2 for the P & T Co. transportation problem with two key differences. Fits, be ‘cause Plant 2 cannot produce Product 3, a dash is inserted into cell ES and the constraint that E12 = Ois included in the Solver dialogue box. Second, because the supplies are upper bounds, cells H11:HI3 have = signs instead of = signs and the corresponding constraint in the Solye dialogue box are ProducedAtPlant (G11:G13) = Capacity (111:113). Using the Excel Solver then gives the optimal solution shown in the changing cells DailyProduction (C11:F13) for the production rate of each product at each plant. This solution minimizes the cost of distributing 120 units of production from the total supply of 195 to meet the total demand of 120 at the four destinations (products). The total cost given in the target cell TotalCost (116) is $3,260 per day. eet formulation ofthe Better Products Co. problem as a variant of a transportation problem, including and the other output cells ProducedAtPlant (G11:G13) and ProductsProduced (C14:F 14), as wel as the up the model. The changing cells DailyProduction (CI1:F13) show the optimal production plan obtained = Unit Cost [Product | Product? | Product3 | Product 4 I | a] Plant S41 su $28 mM _| 6 Plant 3 ‘$37 $30 $27 - 7 [ i Produced - 13 Plant 3. 20 0 0 25 45 [s_ 43 1 |_| Pots Potcet| 20 a I 16 [Required Production 2 ED 30 40, Cs] solver Parameters Solver Options: ‘Range Name Cell a ‘ sume Linear todel | Capacity fg ||_ 9 | Produced a Se (ee ae [bsityerodustion RRequiredProdaction Ci6FI6||_12_| =sUM(CI2-FI2 | subject to the Constraints TovalCost 6 1B | -suMcaFI3) | pez=0 as Unico ca Fein nt x Capit resutereand = ReePret B c D E F 1a [roauet Proauced| =SUMICIECI) | -SUMCDINDI) | ~SUMIEITER T 5 “Toul Cost )MPRODUCT(UnitCont, DayProduction) TABLE 6.8 Data for the Nifty Co, Problem 6.3. Modeling Va on Problems Example 2: Choosing Customers The Nifty Company specializes in the production of a single product, which it produces in three plants. The product is doing very well, so the company currently is receiving more pur- chase requests than it can fill. Plans have been made to open an additional plant, but it will not bbe ready until next year. Forthe coming month, four potential customers (wholesalers) indifferent parts of the coun- try would ike to make major purchases. Customer I is the company’s best customer, so his full order will be met. Customers 2 and 3 also are valued customers, so the marketing manager has decided that, at a minimum, at least a third of their order quantities should be met. However, she does not feel that Customer 4 warrants special consideration, and so is unwilling to guar- antee any minimum amount for this customer, Thee will be enougls units produced go somewhat above these minimum amounts, Due largely to substantial variations in shipping costs, the net profit that would be earned ‘on each unit sold varies greatly, depending on which plant is supplying which customer, There- fore, the final decision on how much to send to each customer (above the minimum amounts established by the marketing manager) will be based on maximizing profit, ‘The unit profit for each combination of a plant supplying a customer is shown in Table 6.8. The rightmost column gives the number of units that each plant will produce for the coming ‘month (a total of 20,000). The bottom row shows the order quantities that have been requested by the customers (a total of 30,000). The next-to-last row gives the minimum amounts that will be provided (a total of 12,000), based on the marketing manager's decisions described above, The marketing manager needs to determine how many units to sell to each customer (ob serving these minimum amounts) and how many units to ship from each plant to each customer to maximize profit, Formulation of a Spreadsheet Model ‘This problem is almost a transportation problem, since the plants can be viewed as sources and the customers as destinations, where the production quantities are the supplies from the sources, If this were fully a transportation problem, the purchase quantities would be the demands for the destinations. However, this does not work here because the requirements assumption (Section 6.2) says that the demand must be a fied quantity to be received from the sources. Except for Customer 1, all we have here are ranges for the purchase quantities between the minimum and the maximum given inthe last two rows of Table 6.8. In fact, one objective is 10 solve for the most desirahle values of these prrchase quantities Figure 6.5 shows the spreadsheet model for this variant of a transportation problem. Instead ‘a demand row below the changing cells, we instead have both a minimum row and a maxi- mum row. The corresponding constraints in the Solver dialogue box are TotalShipped (C17:F17) MaxPurchase (C19:F19) and TotalShipped (C17:F17) = MinPurchase (C15:F15), along with the usual supply constraints, Since the objective is to maximize the total profit rather than ‘minimize the total cost, the Solver dialogue box specifies thatthe target cell TotalProfit (117) is, to be maximized Unit Profit Production Customer: 1 2 3 4 Quantity Plant 1 $55 saz $46 $59 8,000 2 37 18 32 48 5,000 3 29 59 51 35 7,000 Minimum purchase 7.000 3,000 2,000 ° Requested purchase 7,000 «9,000,000 -S«8,000 | 232 Chapter Sit Tissportason an Asinnen: Problems | FIGURE 6.5 _& spreadsheet formulation ofthe Nifty Co, problem asa variant of a transportation problem, including the tenet | cell ToalProfit (117) and the other output cells TotalProduetion (G11:GI3) and TotalShipped (C17:F17), aswell asthe specifications | needed fo setup the model, The changing cells Shipment (CLI:F13) show the optimal shipping plan obtained by the Solver. | al 8 ach D E F G nm —_ | | i_[ Nifty Go. Prodi bution Problem | of eli sa 3s | | 6 Pls $09 $9 sis | 2 —_ tT Toa 10 | J shipment |“ casomert | Cunomer2 [Customers | Castomer | Production J euaniy 0 Plat | 7,000 0 1.000 0 [__ 8000 000 Po2| 0 0 a 5.000 5,000 | Pinto 000 10 ° 7,00 1“ 15_| _[ Min Parchase 3.000 2.000 ° | 16 s s Tol Po “Taal Shipped 6000 2.000 _ Sura Mach 2,000 «000 000 LC | Solver Parameters = —=Solver Options = | Range Name cal ¢ Set Torostcell: [FetarProte) Pig) SA Assume Linear Modet | MaxPurchase cris | |? ~~ fale. @ rin Orin Ova AAssume Non-Negetive | MinPurchase cisris| [10 | Production eae ee ProdutionQuanity 13 | [aa] canna = Shipment curs c Sree Tasraion atten [| esumcnes Subject to the Constraints TetlProit 07 DT cscs Tatar —FrovaTonRT Tetalshipned crane Toslohippes = FscParehon UniProt Cir6 Fottnipped >= Hineurcase B Z D E F 17 | Tort sigged_[ =SUM(CILCTS) | =SUM@DIEDI) | =SUMMEIKEIS) | -SUMIFILFID i 6 7 Sigman | | After clicking on the Solve button, the optimal solution shown in Figure 6.5 is obtained Cells TotalShipped (C17:F17) indicate how many unit o sell to the respective customers. The changing cells Shipment (C11:F13) show how many units to ship from each plant to each cs tomer. The resulting total profit of $1.076 million is given inthe target cell TotalProfit (117). Review 1. What needs ta he dane ta formulate the spreadshaat madel for a variant of a transportation Questions problem where each supply from a source represents @ maximum amount rather than a fed amount to be distributed from that source? 2. What needs to be done to formulate the spreadsheet model fr a variant of a transportation problem where the demand fora destination can be anything between a specified minimum amount and a specified maximum arnount? Water Resources Data for Metro Water Distr 6.4. Some Orher Applications of Varian of Tanspoain Problems 233 You now have and their variants: sn examples illustrating three areas of application of transportation problems 1. Shipping goods (the P&T Co, problem), 2. Assigning plants to products (the Better Produets Co. problém). 3. Choosing customers (the Nifty Co. problem), ‘You will further broaden your horizons in this section by seeing examples illustrating some (but far from all) other areas of application, Distributing Natural Resources Metro Water District is an agency that administers water distribution in a large geographic re- zion. The region is fairly arid, so the district must purchase and bring in water from outside the region. The sources of this imported water are the Colombo, Sacron, and Calorie rivers. The district then resells the water to users in its region. Its main cxsiomers ate the water depart- ‘ments of the cities of Berdoo, Los Devils, San Go, and Hollyglass, Itis possible to supply any of these cities with water brought in from any of the three rivers, ‘with the exception that no provision has been made to supply Hollyglass with Calorie River water, However, because of the geographic layouts ofthe aqueduets and the cities in the region, the cost to the district of supplying water depends upon both the source of the water and the city being supplied. The variable cost per acre foot of water for each combination of river and city is given in Table 6.9. ‘Using unite of 1 million aore fect, the bottom row of the table shows the amount of water needed by each city in the coming year (a total of 12.5). The rightmost column shows the amount available from cach river (a total of 16). ince the total amount available exceeds the total amount needed, management wants to de- termine how much water to take from each river, and then how much to send from each river to each city. The objective is to minimize the total cost of meeting the needs of the four cities, Formulation and Solution Figure 6.6 shows a spreadsheet model for this variant of a transportation problem, Because Hollyglass cannot be supplied with Calorie River water, the Solver dialogue box includes the constraint that F13 = 0, The amounts available in column I represent maximum amounts rather than fixed amounts, so = signs are used for the corresponding constraints, TotalFromRiver (GLL:GI3) = Available (1112113). ‘The Excel Solver then gives the optimal solution shown in Figure 6,6, The cells Total- FromRiver (GI1:G13) indicate that the entire available supply from the Colombo and Sacron rivers should be used whereas only 1.5 million acre feet ofthe 5 million acre feet available from the Calorie River should be used. The changing cells WaterDistribution (C1 1:F13) provide the plan for how much to send from each river to each city. The total cost is given in the target cell TotalCost (117) as $1.975 billion. Cost per Acre Foot Berdoo Los Devils SanGo _Hollyglass Available Colombo River $160 $130 $220 $170 5 Sacron River 140 130 190 150 6 Calorie River 190 200 230 = 5 Needed 2 5 4 5 (milion acre feet) 234 Chapter Sik Tanprttono sigument Probleme FIGURE 6.6 A spreadsheet formulation of the Metro Water District problem as a variant of a transportation problem, including the target cell TotalCost (117) and the other output cells TotalFromRiver (G11:G13) and TotalToCity (C14:F14), as well a the speci fications needed to set up the model, The changing cells WaterDistribution (C11:F13) show the optimal solution obtained by the Sol a 2 ¢ D = D ema ee ‘Metro Water District Distribution Problem C 7 3 | [Unit Cove minions) Beabo | LosDevls | San Go 4 ‘Colombo River 160 130 - 5 ‘Sacron River 140, 130, 190, | . CaloieRiver”™ 190 200 - z 2 | - 3] | Water Debtion Ta | al 0 Beco | LorDevis | SenGo_| Holiyslss | from River valle 1 Colombo Rive | 0 5 0 0 zi..$ nt | SacomRiver| 2 6 25 1s me 6 18 Calo River| 0 ° 1s a i pss 14 Total to City 5 4 1s _ 15 = 7 [Teal Got 16 Needed 2 5 4 1s [anions a l 975. Solver Parameters ‘Range Name Cell 8. Set Target Cel. fefAssume Linear Medel Avatabie rer) 3 Led aalte Otar @ Hn G Méseumvon-tentive | Nenid cisets | [0 | fom Rive Bp coarse; calle. Toast 7 u_| =sumecnFi TuulFromRiver ——GULGID water Dia Tbution Tet TaCity ciara} [2 212) Subject to the Constraints: ee cia La 313) aes =o TotalFremRiver ce avalible taracity = heel ; 3 S z 4 | Toalwociy | =SUM(CIACIS) |

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