BDA 4012 INDUSTRIAL ENGINEERING

Introduction to Industrial Engineering

THE TRANSPORTATION METHOD

OPERATIONS MANAGEMENT STRATEGY AND ANALYSIS 6 EDITION

Lee J. Krajewski, Larry P, Ritzman

Theory

The transportation method is a quantitative approach that can help solve multiple-facility
location problem. We use it here to determine the allocation pattern that minimizes the cost of
shipping product from two or more plants, or sources of supply, to two or more warehouses, or
destinations. We focus on the setup and interpretation the, leaving the rest of the solution process
to a software package on a computer. The transportation method is based on linear programming.
More efficient algorithm for solving this problem can be found in textbooks covering quantitative
methods and management science.

The transportation method does not solve all facets of the multiple-facility location
problem. It only finds the best shipping pattern between plants and warehouses for a particular set
of plant locations, each with a given capacity. The analyst must try a variety of location-capacity
combination and use the transportation method to find the optimal distribution for each one.
Distribution costs (variable shipping and possibly variable production costs) are but one important
input in evaluating a particular location-allocation combination. Investment costs and other fixed
costs also must be considered, along with various qualitative factors. This complete analysis must
be made for each reasonable location-capacity combination. Because of the importance of making
good decision, this extra effort is well worth its cost.

Heuristics

Solution guidelines or rules of thumb that find, that find feasible –but not necessarily the best, the
solution are called heuristics. Their advantages include efficiency and an ability to handle general
view of a problem. The systematic search procedure utililizing a target area’s center of gravity
described earlier for single-facility location problems is a typical heuristic procedure. One of the
first heuristics to be computerized for location problems was propose more than three decades ago
to handle several hundred potential warehouse sites and several thousand demand centers (Kuehn
and Hamburger, 1963). Many other heuristic model are available today for analyzing a variety of
situations.

Example 1

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BDA 4012 INDUSTRIAL ENGINEERING
Introduction to Industrial Engineering

OPERATIONS MANAGEMENT STRATEGY AND ANALYSIS 6 EDITION

Lee J. Krajewski, Larry P, Ritzman

Question 9.6 (Pg. 422)

The Arid Company makes canoe to serve distribution centers in Worchester, Rochester, and
Dorchester from existing plants in Battle Creek and Cherry Creek. Annual demand is expected to
increase as projected is 6000, 22000 and 12000. Arid is considering locating a plant near the
headwaters of Dee Creek. Annual capacity for each plant is 12000, 10000, and 18000.
Transportation costs per paddle are shown in the table below. Determine what are the estimated
transportation costs associated with this allocation pattern.

Destination
Source
Worchester Rochester Dorchester
Battle Creek $4.37 $4.25 $4.89
Cherry Creek $4.00 $5.00 $5.27
Dee Creek $4.13 $4.50 $3.75

Solution:

a) Create a new table to view the capacity and the demand of the problem

Destination
Source Capacity
Worchester Rochester Dorchester
$4.37 $4.25 $4.89 12000
Battle Creek

$4.00 $5.00 $5.27 10000

Cherry Creek

$4.13 $4.50 $3.75 18000

Dee Creek

Demand
6000 22000 12000

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BDA 4012 INDUSTRIAL ENGINEERING
Introduction to Industrial Engineering

b) Find the small costs value and put the demand value in the table. Eliminate the suitable value
between demand and capacity.

Destination
Source Capacity
Worchester Rochester Dorchester
$4.37 $4.25 $4.89 12000
Battle Creek

$4.00 $5.00 $5.27 10000

Cherry Creek

$4.13 $4.50 $3.75 18000

Dee Creek

Demand
6000 22000 12000

Example 2

Theory and Problems In Production And Operations Management, Second Edition (S N

Chary, Indian Institute of management)
Problem 2.4 (Page 71)

The Agri-Products Company has two factories, at Tiruchi and Meerut. There are four major
warehouses to which the finished products are sent: at Guwahati, Nagpur, Ahmedabad and
Chandigarh. The Company plans to locate an additional factory at either Indore or at Kanpur. If the
following matrix gives the details of the shipping costs, manufacturing capacities and warehouse
requirements, how would you go about choosing between the two proposed locations, i.e. Indore
and Kanpur. Suggest an approach.
ShippingCosts Rs per Unit

Place Guwahati Nagpur Ahmedabad Chandigarh Factory Capacity

Tiruchi 25 9 10 20 220
Meerut 10 8 6 5 380
Indore 15 2 4 10 200
Kanpur 9 7 7 5 200

Units Required 100 150 300 250

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BDA 4012 INDUSTRIAL ENGINEERING
Introduction to Industrial Engineering

Solution

To Factory
Guwahati Nagpur Ahmedabad Chandigarh
Capacity
From

Tiruchi 25 9 10 20
220

Meerut 10 8 6 5
380

Indore 15 2 4 10

200

Requirement 100 150 300 250

To Factory
Guwahati Nagpur Ahmedabad Chandigarh
Capacity
From

Tiruchi 25 9 10 20 220

Meerut 10 8 6 5
380

Kanpur 9 7 7 5 200

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BDA 4012 INDUSTRIAL ENGINEERING
Introduction to Industrial Engineering

Requirement
100 150 300 250

CLASS EXERCISE

Exercise 1

OPERATIONS MANAGEMENT STRATEGY AND ANALYSIS 6 EDITION

Lee J. Krajewski, Larry P, Ritzman

Question 22 (Pg. 436) (Assignment)

The Acme Company has four factories (F1, F2, F3 and F4) that ship products to five warehouses.
(W1 to W5). The shipping costs, is shown in figure below. The requirements for every warehouse
are 60000, 70000, 50000, 30000, and 40000. The capacity is 80000 for F1, 60000 for F2, 60000
for F3 and 50000 for F4. What is the total cost of the optimal solution?

Shipping Cost per Case to Warehouse

Factory
Warehouse 1 Warehouse 2 Warehouse 3 Warehouse 4 Warehouse 5

Factory 1
$1.00 $3.00 $4.00 $5.00 $6.00
Factory 2
$2.00 $2.00 $1.00 $4.00 $5.00
Factory 3
$1.00 $5.00 $1.00 $3.00 $1.00
Factory 4
$5.00 $2.00 $4.00 $5.00 $4.00

Answer: $410000

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BDA 4012 INDUSTRIAL ENGINEERING
Introduction to Industrial Engineering