Institute of Management, Nirma University

BBA – MBA Integrated

(Term -V)

Operation Research

Individual Assignment

On

Transportation Problem

Submitted to: Sunita Guru

On January 1st, 2022

Submitted by Grishma Vekaria

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Contents
INTRODUCTION....................................................................................................................................... 3
FORMULATION OF TRANSPORTATION .......................................................................................... 5
STANDARD FORM OF THE TRANSPORTATION PROBLEM ....................................................... 6
SOLUTION THROUGH NORTH-WEST CORNER RULE (NWCR) ................................................ 6
MODIFIED DISTRIBUTION METHOD (MODI) ............................................................................. 8
SOLUTION THROUGH LEAST COST METHOD ............................................................................ 13
MODIFIED DISTRIBUTION METHOD (MODI) ........................................................................... 15
SOLUTION THROUGH VOGEL’S APPROXIMATION METHOD ............................................... 17
MODIFIED DISTRIBUTION METHOD (MODI) ........................................................................... 19
LEARNINGS ............................................................................................................................................. 21
REFERENCE ............................................................................................................................................ 22

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INTRODUCTION

Physical distribution (transportation) of products and services from several supply centres to many
demand centres is one key use of linear programming. When a transportation problem is stated in
terms of an LP model, the simplex method can be used to solve it. Due to the enormous number
of variables and constraints in a transportation problem, solving it using simplex methods takes a
lengthy time.

The Stepping Stone Method and the MODI (modified distribution) Method are two transportation
algorithms that have been created to solve a transportation problem. The other methods which are
also considered are; North-west corner rule, Least cost method and Vogel’s approximation
method. A huge number of shipping routes from numerous supply centres to several demand
centres are involved in the structure of the transportation problem. As a result, the goal is to
determine shipping routes between supply and demand centres in order to satisfy the required
quantity of goods or services at each destination centre with the available quantity of goods or
services at each supply centre at the lowest possible transportation cost and/or time.

The transportation algorithms help to reduce the overall cost of transporting a homogeneous
commodity (product) from the supply center to demand center. It can, however, be used to
maximise total value or utility as well. There are several sorts of transportation models, the most
basic of which was introduced by F L Hitchcock (1941). T C Koopmans (1949) and G B Dantzig
(1950) improved it (1951). Following then, other extensions of transportation models and methods
were developed.

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QUESTION
Formulate and solve the following distribution problem to minimize transportation costs, subject
to supply and demand constraints.

Two electronic component fabrication plants, A and B, build radon - cloud memory shuttles that
are to be distributed and used by three computer system development companies. Following are
the various costs of shipping a memory shuttle from fabrication plants to the system development
sites, the supply available from each fabrication plant, and the demand at each system development
site. Fabrication plant A is capable of creating a supply of 160 shuttles; and the cost to ship to site
1, 2, and 3 is $ 1000, $ 4000, and $ 2500, respectively. Fabrication plant B can produce 200
shuttles, and the shipping costs are $ 3500, $ 2000, and $ 4500 to the three sites. The demand at
site 1 is 150, at site 2 is 120, and at site 3 is 90 memory shuttles.

a) Identify the decision variables, write the objective function, and give the constraints
associated with this problem.
b) Solve this distribution problem.

Matrix for the transportation problem.

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160

B 3500 2000 4500 200

Demand 150 120 90

Note: All cost is in dollars.

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FORMULATION OF TRANSPORTATION
Here, the matrix looks as the table below:

m/n n1 n2 n3 Supply

m1 C11 C12 C13 ∑m1

m2 C21 C22 C23 ∑m2

Demand ∑n1 ∑n2 ∑n3 ∑n1+∑n2+ ∑n3+ =

∑m1+ ∑m2+

This gives the objective function as: Z =

1000*C11+4000*C12+2500*C13+3500*C21+2000*C22+4500*C23

In this case we are going to minimize Z as it is the distribution cost.

Further, by formulating the matrix, we get equations/ subject to constraints as:

1. C11 + C12 + C13 = 160 memory shuttles

2. C21 + C22 + C23 = 200 memory shuttles
3. C11 + C21 = 150 memory shuttles
4. C12 + C22 = 120 memory shuttles
5. C13 + C23 = 90 memory shuttles

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STANDARD FORM OF THE TRANSPORTATION PROBLEM

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160

B 3500 2000 4500 200

Demand 150 120 90 360(Balanced TP)

Note: All cost is in dollars.

Balanced Transportation Problem at 360.

SOLUTION THROUGH NORTH-WEST CORNER RULE

(NWCR)
Fabrication Site 1 Site 2 Site 3 Supply
Plant
A 1000 4000 2500 160

B 3500 2000 4500 200

Demand 150 120 90 360

Note: All cost is in dollars.

Step 1

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160
150 10
B 3500 2000 4500 200

Demand 150 120 90 360

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Step 2

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160
150 10 10
B 3500 2000 4500 200

Demand 150 120 90 360

110

Step 3

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160
150 10 10
B 3500 2000 4500 200
110 90
Demand 150 120 90 360
110

Step 4

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160
150 10 10
B 3500 2000 4500 200
110 90 90
Demand 150 120 90 360
110

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Total allocation = (m + n) – 1

2+3–1=4

The sum is non-degenerate.

Total cost = 150*1000 + 10*400 + 110*2000 + 90*4500 = $ 779,000

MODIFIED DISTRIBUTION METHOD (MODI)

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160 U1 = 0
150 10
B 3500 2000 4500 200 U2 = -2000
110 90
Demand 150 120 90 360

V1 = 1000 V2 = 4000 V3 = 6500

Occupied cells

Cij = Ui + Vj

C11 = U1 + V1 C12 = U1 + V2 C22 = U2 + V2 C23 = U2 + V3

1000 = 0 + V1 4000 = 0 + V2 2000 = U2 + 4000 4500 = -2000 + V3

V1 = 1000 V2 = 4000 U2 = -2000 V3 = 6500

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 Fabrication Site 1 Site 2 Site 3 Supply
Plant
A 1000 4000 2500 160 U1 = 0
150 10 -4500
B 3500 2000 4500 200 U2 = -2000
4500 110 90
Demand 150 120 90 360

V1 = 1000 V2 = 4000 V3 = 6500

Unoccupied cells

ij = Cij – Ui + Vj

13 = C13 – (U1 + V3)

= 2500 – (0 + 6500)

13 = -4500

ij = Cij – Ui + Vj

21 = C21 – (U2 + V1)

= 3500 – (-2000 + 1000)

21 = 4500

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Loop formation

Step 1

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 _ 2500 + 160 U1 = 0
150 10 -4500
B 3500 2000 4500 200 U2 = -2000
4500 110 + 90 _
Demand 150 120 90 360

V1 = 1000 V2 = 4000 V3 = 6500

A square loop is being formed in step 1.

𝜽 = 𝟏𝟎
Fabrication Site 1 Site 2 Site 3 Supply
Plant
A 1000 4000 _ 2500 + 160
150 10
B 3500 2000 4500 200
4500 120 + 80 _
Demand 150 120 90 360

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Reapply the modified distribution method.

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160 U1 = 0
150 10
B 3500 2000 4500 200 U2 = 2000
120 80
Demand 150 120 90 360

V1 = 1000 V2 = 0 V3 = 2500

Occupied cells

Cij = Ui + Vj

C11 = U1 + V1 C13 = U1 + V3 C23 = U2 + V3 C22 = U2 + V2

1000 = 0 + V1 2500 = 0 + V3 4500 = U2 + 2500 2000 = 2000 + V2

V1 = 1000 V3 = 2500 U2 = 2000 V2 = 0

Unoccupied cells

ij = Cij – Ui + Vj

21 = C21 – (U2 + V1)

= 3500 – (2000 + 1000)

21 = 500

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 ij = Cij – Ui + Vj

12 = C12 – (U1 + V2)

= 4000 – (0 + 0)

12 = 4000

There is no delta less than or equal to 0 therefore the optimum solution has been reached.

Total allocation = m + n – 1

=2+3–1=4

Total cost = 150*1000 + 120*2000 + 10*2500 + 80*4500 = $ 775,000

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SOLUTION THROUGH LEAST COST METHOD

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160

B 3500 2000 4500 200

Demand 150 120 90 360

Note: All cost is in dollars.

Step 1

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160
150 10
B 3500 2000 4500 200

Demand 150 120 90 360

Step 2

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160
150 10
B 3500 2000 4500 200
120 80
Demand 150 120 90 360

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Step 3

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160
150 10 10
B 3500 2000 4500 200
120 80
Demand 150 120 90 360
80

Step 4

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160
150 10 10
B 3500 2000 4500 200
120 80 80
Demand 150 120 90 360
80

Total allocation = m + n – 1

2+3–1=4

The sum is non-degenerate.

Total cost = 150*1000 + 120*2000 + 10*2500 + 80*4500 = $ 775,000

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MODIFIED DISTRIBUTION METHOD (MODI)

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160 U1 = 0
150 10
B 3500 2000 4500 200 U2 = 2000
120 80
Demand 150 120 90 360

V1 = 1000 V2 = 0 V3 = 2500

Occupied cells

Cij = Ui + Vj

C11 = U1 + V1 C13 = U1 + V3 C23 = U2 + V3 C22 = U2 + V2

1000 = 0 + V1 2500 = 0 + V3 4500 = U2 + 2500 2000 = 2000 + V2

V1 = 1000 V3 = 2500 U2 = 2000 V2 = 0

Unoccupied cells

ij = Cij – Ui + Vj

21 = C21 – (U2 + V1)

= 3500 – (2000 + 1000)

21 = 500

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 ij = Cij – Ui + Vj

12 = C12 – (U1 + V2)

= 4000 – (0 + 0)

12 = 4000

There is no delta less than or equal to 0 therefore the optimum solution has been reached.

Total allocation = m + n – 1

=2+3–1=4

Total cost = 150*1000 + 120*2000 + 10*2500 + 80*4500 = $ 775,000

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SOLUTION THROUGH VOGEL’S APPROXIMATION
METHOD

Step 1

Fabrication Site 1 Site 2 Site 3 Supply Row difference

Plant
A 1000 4000 2500 160 1500
150 10
B 3500 2000 4500 200 1500

Demand 150 120 90 360

Column 2500 2000 2000

difference

Note: All cost is in dollars.

Step 2

Fabrication Site 1 Site 2 Site 3 Supply Row difference

Plant
A 1000 4000 2500 160 1500 1500
150 10
B 3500 2000 4500 200 1500 2500
120 80
Demand 150 120 90 360

Column 2500 2000 2000

difference
2000 2000

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Step 3

Fabrication Site 1 Site 2 Site 3 Supply Row difference

Plant
A 1000 4000 2500 160 1500 1500 2500
150 10
B 3500 2000 4500 200 1500 2500 4500
120 80 80
Demand 150 120 90 360
10
Column 2500 2000 2000
difference
2000 2000

2000

Step 4

Fabrication Site 1 Site 2 Site 3 Supply Row difference

Plant
A 1000 4000 2500 160 1500 1500 2500
150 10 10
B 3500 2000 4500 200 1500 2500 4500
120 80 80
Demand 150 120 90 360
10
Column 2500 2000 2000
difference
2000 2000

2000

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Total allocation = m + n – 1

Total cost = 2 + 3 – 1 = 4

The sum is non-degenerate.

Total cost = 150*1000 + 120*2000 + 80*4500 + 10*2500 = $775,000

MODIFIED DISTRIBUTION METHOD (MODI)

Fabrication Site 1 Site 2 Site 3 Supply

Plant
A 1000 4000 2500 160 U1 = 0
150 10
B 3500 2000 4500 200 U2 = 2000
120 80
Demand 150 120 90 360

V1 = 1000 V2 = 0 V3 = 2500

Occupied cells

Cij = Ui + Vj

C11 = U1 + V1 C13 = U1 + V3 C23 = U2 + V3 C22 = U2 + V2

1000 = 0 + V1 2500 = 0 + V3 4500 = U2 + 2500 2000 = 2000 + V2

V1 = 1000 V3 = 2500 U2 = 2000 V2 = 0

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Unoccupied cells

ij = Cij – Ui + Vj

21 = C21 – (U2 + V1)

= 3500 – (2000 + 1000)

21 = 500

ij = Cij – Ui + Vj

12 = C12 – (U1 + V2)

= 4000 – (0 + 0)

12 = 4000

There is no delta less than or equal to 0 therefore the optimum solution has been reached.

Total allocation = m + n – 1

=2+3–1=4

Total cost = 150*1000 + 120*2000 + 10*2500 + 80*4500 = $ 775,000

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LEARNINGS

The transportation problem helps minimize cost through allocating the amount of goods available
with the business or a person. The demand had to be equal to the supply for the transportation
problem to be solved. Otherwise, a dummy column or row is added to make the transportation
problem balanced. The allocation should also fulfill the condition m + n – 1, to avoid degeneracy.
The analysis of the transportation problem aids in the identification of ideal transportation routes
as well as units of cargo to be shipped in order to reduce total transportation costs.

In the above case it can be seen that the North-west corner rule gave an incorrect distribution which
would cost the business more. The modified distribution helped to correct the mistake. The other
two methods gave same results, that is the lowest cost of $775,000. In all solutions through
different methods the allocations are equal to m + n – 1 hence there is no degeneracy. There are 4
allocations made in all the solutions which have been done above.

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REFERENCE

BOOK: Michael W. Carter, Camile C. Price, Gaith Rabadi, 2019, Operations Research, A
practical introduction, Second Edition, 6000 Broken Sound Parkway NW, Suite 300 Boca Raton,
FL 33487-2742, Taylor and Francis Group. Page 148 question 3.3

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