Least Cost Method/Matrix Minimum Method:

The intuitive method makes initial allocations based on lowest cost.

This straightforward approach uses the following steps:

• 1. Identify the cell with the lowest cost. Break any ties for the lowest cost
arbitrarily.

• 2. Allocate as many units as possible to that cell without exceeding the

supply or demand. Then cross out that row or column (or both) that is
exhausted by this assignment.

• 3. Find the cell with the lowest cost from the remaining (not crossed out)
cells.

• 4. Repeat steps 2 and 3 until all units have been allocated.

Example 1

Consider the transportation problem presented in the following table:

Retail Shop
Factory Supply
1 2 3 4
1 3 5 7 6 50
2 2 5 8 2 75
3 3 6 9 2 25
Demand 20 20 50 60

Solution.

We observe that c21 =2, which is the minimum transportation cost. So x21 = 20. The demand for
the first column is satisfied. The allocation is shown in the following table.

Table 1

Retail Shop
Factory Supply
1 2 3 4
1 3 5 7 6 50
2 5 8 2 75  55
3 3 6 9 2 25
Demand 20 20 50 60

Now we observe that c24 =2, which is the minimum transportation cost, so x24 = 55. The supply
for the second row is exhausted.

Table 2
 Retail Shop Supply
Factory
1 2 3 4
1 3 5 7 6 50
2 5 8 75
3 3 6 9 2 25
Demand 20 20 50 60 5

Proceeding in this way, we observe that x34 = 5, x12 = 20, x13 = 30, x33 = 20. The resulting feasible
solution is shown in the following table.

Final Table

Retail Shop Supply

Factory
1 2 3 4
1 3 6 50
2 5 8 75
3 3 6 25
Demand 20 20 50 60

Number of basic variables = m + n –1 = 3 + 4 – 1 = 6.

Initial basic feasible solution

The total transportation cost associated with this solution is calculated as given below:
20 X 2 + 20 X 5 + 30 X 7 + 55 X 2 + 20 X 9 + 5 X 2 = 650 units.

Example 2
Consider the transportation problem presented in the following table:

Warehouse
Factory Supply
W1 W2 W3

F1 16 20 12 200

F2 14 8 18 160

F3 26 24 16 90

Demand 180 120 150 450

Solution.

We observe that F2W2 = 8, which is the minimum transportation cost and allocate 120 units to it.
The demand for the second column is satisfied.

Table 1

Warehouse
Factory Supply
W1 W2 W3

F1 16 20 12 200

F2 14 18 160 40

F3 26 24 16 90

Demand 180 120 150 450

The resulting feasible solution is shown in the following table.

Final Table

Warehouse
Factory Supply
W1 W2 W3

F1 20 200
 F2 18 160

F3 24 16 90

Demand 180 120 150 450

Number of basic variables = m + n –1 = 3 + 3 – 1 = 5.

Initial basic feasible solution

The total transportation cost associated with this solution is calculated as given below:
50 X 16 + 150 X 12 + 40 X 14 + 120 X 8 + 90 X 26 = 6460 units.