J. Math. and Math. Sci., Vol.

26, 2011,123-130

MINIMIZATION OF TRANSPORTATION COST BY DEVELOPING AN

EFFICIENT NETWORK MODEL

M. SHARIF UDDIN1, SAYEDUL ANAM2, ABDUR RASHID1 AND AMINUR R.

KHAN1
1
Department of Mathematics, Jahangirnagar University, Savar , Dhaka.
2
Dept. of Business Administration, Daffodil International University, Dhaka.

Abstract
Network model is a useful technique to analyze and formulate transportation problem due to its
stable and smooth characteristics. We develop a Network Model which contains at least one supply
node and one demand node and the other transshipment node in order to minimize the total
transportation cost. We locate, in this paper, the shortest route using Network Model as the shortest
route provides the effective minimum transportation cost. Finally, we take up North-West Corner
Rule [1] to see the minimum transportation cost. For testing optimality we also use Extremum
Difference Method (EDM) [2]. The experimental results based on Network Model discussed herein
demonstrate more accurate approximation.

Keywords: Distribution Network, Transportation Model, EDM, Supply Node,

Demand Node.

1. Introduction
The transportation model is a special class of linear programs that deals with
shipping a single homogeneous commodity from several sources (e.g., factories) to
different destinations (e.g., warehouses). The objective is to determine the
shipping schedule that minimizes the total shipping cost while satisfying supply
and demand limits. The two common objectives of such problems are either (i) to
minimize the cost of shipping m units to n destinations or (ii) to maximize the
profit of shipping m units to n destinations [3].
The application of the transportation model can be extended to other areas of
operation including inventory control, employment scheduling and personnel
assignment.
124 M. Sharif Uddin et al

In this paper we use distribution network problem. We describe distribution

network problem as a major type of linear programming problem that deals with
the distribution of goods through a distribution network at a minimum cost [4].
The term distribution network problem is, in fact, just another name for Minimum
Flow Problem.

2. Development of the Model

2.1 Preprocessing:
We consider, without loss of generality, the case of The Shah Cement industry. It
is one of the biggest cement industries in Bangladesh. It receives raw materials,
processes them at its own industries and then distributes the goods for eventual
sale.
The company has two factories. The main factory is in Narayanganj, Dhaka and
the other factory is in Daudkandi, Comilla. It has five delivery centres. The
company delivers all the products from these two factories to five delivery centres
namely Faridpur, Khulna, Barisal, Jessore and Chittagong.Both the factories have
different transportation cost in shifting cement to different delivery centres. Now
we denote Narayanganj Factory by F1 and Daudkandi Factory by F2 while the
delivery centres Faridpur, Khulna, Barisal, Jessore and Chittagong are denoted by
D1, D2, D3, D4, D5 respectively. The Table-1 shows unit cost from F1 and F2 to
D1, D2, D3, D4 and D5.
From Narayanganj ( Factory-1 ), Dhaka From Daudkandi ( Factory-2 ), Comilla
Delivery Delivery
Cost per Total cost Cost per Total Cost
Centre Centre Dista Total Dista Total
unit (Fractional unit (Fractional
Code Name nce Cost nce Cost
distance part Excluded) distance part Excluded)
D1 Faridpur 145 10.22 1481.9 1481 241 9.32 2246.1 2246
D2 Khulna 335 10.22 3423.7 3423 431 9.32 4016.9 4016
D3 Barisal 277 10.22 2830.9 2830 373 9.32 3476.3 3476
D4 Jessore 274 10.22 2800.2 2800 370 9.32 3448.4 3448
D5 Chittago 264 10.22 2698.0 2698 167 9.32 1556.4 1556
ng Table-1
Minimization of Transportation Cost by Developing an Efficient Network Model 125

Table-2 shows demand of five delivery centres and supply of two factories:
Delivery Centre Name Total Demand Supply From Fact-1 Supply From Fact-2
Faridpur 12 8 4
Khulna 15 12 3
Barisal 18 12 6
Jessore 13 10 3
Chittagong 19 5 14

Table-2
Using Table-1 and Table-2 we derive the transportation (Table-3) matrix
considered as Transportation problem:
The Unit Transportation Cost Matrix
D1 D2 D3 D4 D5 Supply
F1 1481 3423 2830 2800 2698 47
F2 2246 4016 3476 3448 1556 30
Demand 12 15 18 13 19 77
Table-3

2.2 Network
The model for minimum cost flow problem is represented by a network passing
through it. The circles of the network are called nodes while arrows of the network
are called arcs. Each node where the net amount of flow generated is a fixed
positive quantity is a supply node. We denote these nodes by F1 and F2 as a
supply node. Each node where the net amount of flow generated is a fixed negative
(positive in the figure) quantity is a demand node. We denote these nodes D1, D2,
D3, D4 and D5 as a demand node. The maximum amount flow allowed through an
arc is rescheduled as the capacity of that arc. Here in the arc the first part of
parentheses is unit and second part is unit cost for delivery centre for that arc. The
initial network models [5,6] are given below.
126 M. Sharif Uddin et al

D1

(4,2246)

D2 (12,0)
F1
(15,0)
(3,4016)
(47,0)
D3
m
(18,0)
O
(13,0)

(30,0) D4
(19,0)
F2 (5,2698)

D5

Figure-1: Initial Network

Unit shift from F1 Unit Cost
Delivery Unit shift Unit Cost Total minimum cost
to delivery center from F1 to Dj
Centre from F2 to Dj from F2 to Dj for shifting to Dj
Dj (j=1 to 5)
D1 8 1481 4 2246 20832
D2 12 3423 3 4016 53124
D3 12 2830 6 3476 54816
D4 10 2800 3 3448 38344
D5 5 2698 14 1556 35274
Total Cost 202390
Table-4: Unit Cost and Total Cost
Now we solve this network problem by changing transportation unit and
considering two conditions: (i) total demand for each delivery centre must be equal
and (ii) factory’s production capability will remain unchanged. We try to change
unit when delivery centers take cement from one factory to another for decreasing
transportation cost.
At first D1 takes 8 units from F1 and 4 units from F2 and it will have to
pay the total amount of 20832. Unit cost of F2 to D1 is greater than F1 to D1. So,
D1 will tend to take more units from F1. Thus, D1 takes 10 from F1 and 2 from
F2. Then the transportation cost will decrease. But it does not fulfill condition (ii).
So we require a change. Now, D5 takes 5 units from F1 and 14 units from F2 and
has to pay the total amount of 35274. Unit cost of F1 to D5 is greater than F2 to
D5. So D5 takes more from F2. Thus, D5 takes 16 from F2 and 3 from F1. Here,
transport cost also decreases. Now, we will turn to the Network Model and its
table of calculations as follows:
Minimization of Transportation Cost by Developing an Efficient Network Model 127

D1

(2,2246)

D2 (12,0)
F1
(15,0)
(3,4016)
(47,0)
D3
m
(18,0)
O
(13,0)

(30,0) D4
(19,0)
F2 (3,2698)

D5

Figure-2
Delivery Unit shift from Unit Cost Unit shift Unit Cost Total minimum cost
Centre F1 to Dj from F1 to Dj from F2 to Dj from F2 to Dj for shifting to Dj
D1 10 1481 2 2246 19302
D2 12 3423 3 4016 53124
D3 12 2830 6 3476 54816
D4 10 2800 3 3448 38344
D5 3 2698 16 1556 32990
Total Cost 198576
Table-5
Proceeding with a similar approach, by changing the transportation unit, we obtain
the following network model and computation table:
D1

(0,2246)

D2 (12,0)
F1
(15,0)
(11,4016)
(47,0)
D3
m
(18,0)
O
(13,0)

(30,0) D4
(19,0)
F2 (1,2698)

D5

Figure-3
Delivery Unit shift from Unit Cost Unit shift Unit Cost Total minimum cost
Centre F1 to Dj from F1 to Dj from F2 to Dj from F2 to Dj for shifting to Dj
D1 12 1481 0 2246 17772
D2 4 3423 11 4016 57868
D3 18 2830 0 3476 50940
D4 12 2800 1 3448 37048
D5 1 2698 18 1556 30706
Total Cost 194334
Table-6
128 M. Sharif Uddin et al

Finally, D4 takes 12 units from F1 and 1 unit from F2 and total cost 37048. Unit
cost of F2 to D4 is greater than F1 to D4. So D4 takes more from F1. So D4 takes
13 from F1 and 0 from F2. Then the transport cost is being decreased. But
condition (ii) is not fulfilled. So we are led to a change. To fulfill, D5 takes 0 units
from F1 and 19 units from F2. The network model and computation table are
given below.
D1

(0,2246)
(0,2246)
D2 (12,0)
F1
(15,0)
(11,4016)
(47,0)
D3
m
(18,0)
O
(13,0)

(30,0) D4
(19,0)
F2 (0,2698)

D5

Figure-4

Delivery Unit shift from Unit Cost Unit shift from Unit Cost Total minimum cost
Centre F1 to Dj from F1 to Dj F2 to Dj from F2 to Dj for shifting to Dj
D1 12 1481 0 2246 17772
D2 4 3423 11 4016 57868
D3 18 2830 0 3476 50940
D4 13 2800 0 3448 36400
D5 0 2698 19 1556 29564
Total Cost 192544
Table-7
Here it is observed that changes in transportation units in Table-7 we increase
total transportation cost therein. So we see that the total cost mentioned above (in
Table-7) is minimum.
3. Results and Discussions:
3.1 Results using Network Model
From the above discussion, we find that D1 takes 12 units from F1, D2 takes 4
units from F1 and 11 units from F2, D3 takes 18 units from F1, D4 takes 13 units
from F1 and D5 takes 19 units from F2. So the shortest routs are
Minimization of Transportation Cost by Developing an Efficient Network Model 129

F1→D1, F1→D2, F2→D2, F1→D3, F1→D4, F2→D5.

According to this route the total transportation cost is Tk. 192544.

3.2 Results using Extremum Difference Method (EDM):

Now we apply Extremum Difference Method (in Table-3) which is simpler than
Vogel’s Approximation Method. Using the algorithm of EDM, we find the
following allocations:
D1 D2 D3 D4 D5 Supply Row Penalty:
F1 12 4 18 13
2698 47 (1942) (1942) (623) (593)
1481 3423 2830 2800
11 19
F2 2246 3476 3448 30 (2460) (1770) (568) (540)
4016 1556
Demand 12 15 18 13 19 77
Column (765) (593) (646) (648) (1142)
Penalty: (765) (593) (646) (648) ----
---- (593) (646) (648) ----
---- (593) (646) ---- ----
Table-8
Therefore the transportation cost according to Extremum Difference Method:
Z 12  1481  4  3423 18  2830  13  2800  11  4016 19 1556 =
Tk.192544
which is identical with the cost obtained by Network Model.

3.3 Results using North-West Corner Rule:

Now we apply North-West corner rule to solve the transportation problem (Table-
3).
The transportation table of the problem has 10 cells. The first allocation is made in
the cell (1,1), the magnitude being x11 = min(47,12)=12. The second allocation is
made in the cell(1,2) and the magnitude of allocation is given by x12 =min(47-
12,15)=15.The third allocation is made in the cell(1,3), the magnitude being x13
=min(47-(12+15),18)=18. The magnitude of fourth allocation in the cell (1,4) is
given by x14 =min(47-(12+15+18),13)=2
130 M. Sharif Uddin et al

The fifth allocation is made in the cell (2,4), the magnitude being x 24 =min(30,13-
2)=11 and the last allocation is made in cell (2,5) of being magnitude x 25
=min(30-11,19)=19.
D1 D2 D3 D4 D5 Supply
F1 12 15 18 2 47
1481 3423 2830 2800 2698
F2 11 19 30
2246 4016 3476 3448 1556
Demand 12 15 18 13 19 77
Table-9
Therefore the transportation cost according to North –West Corner Rule is:
Z 12  1481  15  3423 18  2830  2  2800 11  3448 19 1556 =Tk.
193149

3. Conclusion:
In Table -4, the usual transportation cost was Tk. 202390. The transportation cost
based on Network Model came to be Tk.192544 which is similar to the cost
obtained by Extremum Difference Method while by North-West Corner Rule the
cost incurred was Tk. 193149.This demonstrates that the Model described in this
paper provides more effective transportation cost in comparison to the cost by
North-West Corner Rule.

4. References
1. Hillier, Lieberman: Introduction to operations research, 7th edition, McGraw-
Hill.
2. H.S. Kasana and K.D. Kumar, Introductory Operations Research: Theory and
Applications, Springer, PP. 509-511, 2004.
3. Blainski. M.L.: "Fixed-Cost Transportation Problems, Naval research logistics
Quarterly".
4. Williams.A.C: "A treatment of transport Problems by Decomposition".
5. Sayedul Anam: M.S. Thesis 2007, ‘On Development of Network Model: An
Approach to Minimize Transportation Cost’ (Dept. of Mathematics, Jahangirnagar
University).
Minimization of Transportation Cost by Developing an Efficient Network Model 131

6. Gupta, S.K., Linear Programming and Network Models, East West Press
Pvt. Ltd., New Delhi.