Chapter 07

Quantitative Business Analysis
Linear Programming: Simplex Method
Dr. Md. Showkat Ali
Bangladesh University of Professionals
September 26, 2022

Outline
1 The Transportation Problem
2 Step I: Make a Transportation Table
3 Step II: Initial Basic Feasible Solution to TP
4 North-West Corner Method (NWCM)
5 Least Cost Method (LCM)
6 Vogel’s Approximation Method (VAM)
7 Step III: Optimality Test
8 Optimal Solution to Transportation Problem
9 The Stepping Stone Method
10 The Modified Distribution (MODI) Method
11 Step IV: Iterate Towards an Optimal Solution
12 Step V: Optimality Test
13 Step VI: Iterate Towards an Optimal Solution
14 Step VII: Optimality Test
15 Variants in Transportation Problems
16 Unbalanced Transportation Problem
17 Profit Maximization Problem
Dr. Md. Showkat Ali Quantitative Business Analysis September 26, 2022 2 / 71
Outline
Introduction
Assumptions
The Transportation Problem
The transportation problem deals with the distribution of goods from

several points of supply (origins or sources) to a number of points of
demand (destinations). Usually we are given a capacity (supply) of
goods at each source, a requirement (demand) for goods at each
destination, and the shipping cost per unit from each source to each
destination. An example is shown in Figure 9.1. The objective of such
a problem is to schedule shipments so that total transportation costs
are minimized. At times, production costs are included also.
Transportation models can also be used when a firm is trying to decide
where to locate a new facility. Before opening a new warehouse,
factory, or sales office, it is good practice to consider a number of
alternative sites. Good financial decisions concerning the facility
location also attempt to minimize total transportation and production
costs for the entire system.
The Transportation Problem (Contd)
Figure 1: Network Representation of a Transportation problem, with Costs,

Demands, and Supplies
The Transportation Problem: Example
The Executive Furniture Corporation is faced with the transportation

problem shown in Figure The company would like to minimize the
transportation costs while meeting the demand at each destination
and not exceeding the supply at each source. In formulating this as a
linear program, there are three supply constraints (one for each
source) and three demand constraints (one for each destination). The
decisions to be made are the number of units to ship on each route, so
there is one decision variable for each arc (arrow) in the network.
The Transportation Problem: Example (Contd)
Let
The Transportation Problem: Example (Contd)
The solution to this LP problem could be found using Solver in Excel

2010 by putting these constraints into a spreadsheet, as discussed in
Chapter 7. However, the special structure of this problem allows for an
easier and more intuitive format, as shown in Program 9.1. Solver is
still used, but since all the constraint coefficients are 1 or 0, the
left-hand side of each constraint is simply the sum of the variables
from a particular source or to a particular destination. In Program 9.1
these are cells E10:E12 and B13:D13.
A General LP Model for Transportation Problems
Outline
Step I: Make a Transportation Table
Outline
Initial Basic Feasible Solution to Transportation Problems
Initial Basic Feasible Solutions

• North-West Corner Method (NWCM)
• Least Cost Method (LCM)
• Vogel’s Approximation Method (VAM)
North-West Corner Method (NWCM)
Outline
North-West Corner Method (NWCM)
Outline
Least Cost Method (LCM)
Outline
Vogel’s Approximation Method (VAM)
Outline
Optimality Test
Optimality Test (Contd)
Outline
Optimal Solution to Transportation Problem
Optimal/ Final Solutions

• Stepping Stone Method
• Modified Distribution (MODI) Method / U − V Method
Outline
The Stepping Stone Method
The Stepping Stone Method (Continued)
The Stepping Stone Method (Continued)
Outline
The MODI Method
The MODI Method (Continued)
Outline
Iterate Towards an Optimal Solution
Iterate Towards an Optimal Solution (Contd)
Outline
Optimality Test
Optimality Test (Continued)
Outline
Iterate Towards an Optimal Solution
Outline
Optimality Test
Outline
Variants in Transportation Problems
Transportation Problems

2 Maximization Problem
Outline
The Unbalanced Transportation Problems
The Unbalanced Problem: Example
The Unbalanced Problem: Solution
Outline
The Maximization Problem
Profit Maximization Problem: Example
Maximization Problem: Solution

Chapter 07

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 07

Uploaded by

Copyright:

Available Formats

Quantitative Business Analysis

Linear Programming: Simplex Method

Dr. Md. Showkat Ali

Bangladesh University of Professionals

September 26, 2022

The transportation problem deals with the distribution of goods from

Figure 1: Network Representation of a Transportation problem, with Costs,

The Executive Furniture Corporation is faced with the transportation

The solution to this LP problem could be found using Solver in Excel

Initial Basic Feasible Solutions

Optimal/ Final Solutions

1 Unbalanced Transportation Problem

You might also like