3.

1 Overview
In the world of business where the movement of inventories is inevitable, raw materials
may come from multiple
locations.
Let us say from Davao City, Cebu City, and Baguio City, yet the manufacturing process
is centralized in Manila. How can a company strategize to minimize its delivery cost?
Would it be wise to just choose the nearest location to the manufacturing site? Would
the quality of the product be affected? In this case, we need to solve it using another
linear programming
structure.
Hence, leading us to our topic, the Transportation and Assignment
model.

Transportation Model deals with the distribution of goods from several points of supply
(sources) to several points of demand
(destinations).
Usually, we are given the capacity of goods at each source and the requirements at
each destination.

Assignment Model refers to the class of LP problems that involve determining the
most efficient assignment of resources to
tasks.
One important characteristic of assignment problems is that only one job or worker can
be assigned to one machine or project.

Transshipment Model - In a transportation problem, if the items being transported

must go through an intermediate point (called a transshipment point) before reaching a
final destination such as a Regional unit.
The optimum solution is the most minimal cost.
3.2 Northwest corner method

Let us solve the illustrative problem:

BTS Company is a supplier of appliances in the Philippines.

The entity has three major factories located in the following key
areas:
Baguio City 100 units capacity.
Cebu City 300 units capacity.
Davao City 300 units capacity.

The entity also has three warehouses, namely:

Quezon City 300 units requirements.
Bacoor City 200 units requirements.
Iloilo City 200 units requirements.

The related shipping cost per route is given below:

To see the picture, let us prepare a network representation of the transportation model:

We first solve using the Northwest Corner

Method.
Keynotes under Northwest Corner Method :

1. Start with the Uppermost point corner (from the method itself northwest)
2. Move to the right (west) to meet the capacity
3. If already met, then, move down to the next northwest column until all are met
4. Plot the cost under each route by multiplying shipping cost per unit by the total
number of units.
5. Compute for the total cost. However, this is only the 1st solution and not necessarily
the most minimal cost.

We plot the route starting at the uppermost point corner:

Take note:

1. Select a route that has a zero unit as a starting

point.
2. Move to the left, down, up, until you reach your starting point.
 3. Notice that each route contains the shipping cost per unit. Add all of this value (or
called Index) but the even destination should bear a negative sign.

Using the cost per shipping, let us also plot the cost per route:

Compute the Index value of the route:

The total cost per Northwest solution is P4,200 but we have computed a negative index.

A negative index pertains to that there is a route to be improved. This would mean that
a better route should be made.
In this case, we use the stepping stone method.

3.3 Stepping stone method

Since there is a negative index, we will use that as the starting point for the second
solution or the stepping stone solution.

Keynotes:

1. We will simply add units for the empty location of the route that yields a
negative index (0+100; Davao to QC).
2. Subtract the same number of units to the next route until the last destination
(200-100, Cebu to QC).
3. Be guided that the original total shipped is equaled to supply while the total
received equals demand.
4. Do the same process in the first solution.
And since there is again a negative index, we will use that as the starting point for the
third solution.
Likewise, we will simply add units for the empty location of the route that yields a
negative index and subtract the same number of units until the last
destination.
Can you compute the total cost of the 3rd solution (this will serve as your group
activity)?
Note: If all indexes are positive then it is the optimal solution.

We can also compute it using the MS excel formula. Just plot the table on your
worksheet (similar to the hand-outs)
Make this also as your assignment, plot this in MS Excel, and use the formula
below:
TOTAL COST = SUMPRODUCT(cell of cost, cell of units)

.4 Assignment model

Assignment Model refers to the class of LP problems that involve determining the
most efficient assignment of resources to
tasks.
One important characteristic of assignment problems is that only one job or worker can
be assigned to one machine or project.

Illustrative problem:
The Caribbean Company has three rush projects to repair.
They have three repairpersons with different talents and abilities namely Aruba,
Barbados, and Curacao.
The owner has estimates of wage costs for each worker for each project.
The owner’s objective is to assign the three project to the workers in a way that will
result in the lowest cost to the shop
Each project will be assigned exclusively to one worker.

Requirement:
Using the assignment model, compute the most minimal cost of assigning the
employees to the exclusive market.

To solve this, we will make a labor cost combination:

The Caribbean Company should Project A to Aruba, Project B to Barbados, and Project
C to Curacao.
3.5 Summary

1. Transportation Model deals with the distribution of goods from several

points of supply (sources) to several points of demand
(destinations).
2. Assignment Model refers to the class of LP problems that involve
determining the most efficient assignment of resources to
tasks.
3. Transshipment Model - In a transportation problem, if the items being
transported must go through an intermediate point (called a transshipment
point) before reaching a final destination such as a Regional
unit.