PAMPANGA STATE AGRICULTURAL UNIVERSITY

Department of Agricultural Business Economics & Entrepreneurship

Module 3 TRANSPORTATION AND ASSIGNMENT PROBLEMS

Transportation problem is concerned with selecting routes in product distribution network

among manufacturing firms/plants and distribution warehouses or among regional distribution
warehouses and local distribution outlets. The assignment problem, on the other hand, involves
assigning employees to tasks, salespersons to territories, contract to bidders, or jobs to plants.
In applying transportation method and the assignment method, management is searching for a
distribution route or an assignment which will optimize some objective; this can be the
minimization of total transportation cost, the maximization of profit, or the minimization of total
time involved.

Example

Let us consider the case the case of the Bass Gravel Company, which has received a
contract to supply gravel for three new road projects located in the towns of Greenville,
Fountain, and Ayden. Construction engineers have estimated the amounts of gravel which will
be needed at three road construction projects:

Weekly
requirements,
Project Location truckloads
A Greenville 72
B Fountain 102
C Ayden 41
Total 215

The Bass Gravel Company has three gravel plants located in the towns of Kinston,
Wilson, and Bethel. The gravel required for the construction projects can be supplied by these
three plants. Bass’s chief dispatcher has calculated the amounts of gravel which can be
supplied by each plant:

Weekly
requirements,
Plant Location truckloads
W Kinston 56
X Wilson 82
Y Bethel 77
Total 215

At this point, we see that the total amount available is exactly equal to the total amount
required. When total supply is equal to total demand, a balanced condition is said to exist.
Although the balanced case is very unlikely in actual practice, it will enable us to focus on the
basic ideas underlying the transportation method. The unbalanced case, where supply and
demand are unequal.

The company has computed the delivery costs from each plant to each project site. As in
the linear programming problems discussed, we assume that the variables in the problem must
be linearly related. In this case, total delivery costs between each plant and project site vary
directly with the number of truckloads of gravel distributed.

Management 181 Quantitative Business Analysis by: Prof. Leslie V. Torres

 PAMPANGA STATE AGRICULTURAL UNIVERSITY
Department of Agricultural Business Economics & Entrepreneurship

Cost per truckload

From To project A To project B To project C
Plant W $4 $8 $8
Plant X 16 24 16
Plant Y 8 16 24

Linear Programming Formulation

I. Step 1: Set up the transportation tableau

Step 2: Develop an initial solution
Step 3: Test the solution for the improvement

Steps in evaluating any unused square

a. Choose the unused square to be evaluated.
b. Trace a closed path (measuring horizontally and vertically)
c. Assign + and – sign alternately.
d. Determine the net change in costs.
e. Repeat the above steps.

Step 4: Develop the improved solution, select the largest negative improvement index.

II. The MODI method may be summarized by the following steps.

a. For the solution, compute the R & K values using the formula R i + Kj = Cij (the
cost at the stone ij) Ri is always set equal to zero)
b. Calculate the improvement indices for all unused squares using Cij (cost of
unused square) - Ri - Kj = improvement index.
c. Select the unused square with the largest negative index.
d. Trace the closed path for the unused square having the largest negative index.
e. Develop an improved solution using the same procedure as the outlined in the
stepping stone method.
f. Repeat steps 1 to 5 until the optimal solution has been found.

The Transportation Method

Step 1: Set up the transportation tableau

From To Project A Project B Project C Plant Capacity

Plant W 56
Plant X 82
Plant Y 77
Project requirements 72 102 41 215 215

Step 2: Develop an initial solution

a. Starting at the upper-left hand corner (northwest corner rule) of the tableau, the supply
available at each row must be exhausted before moving down to the next row, and the

Management 181 Quantitative Business Analysis by: Prof. Leslie V. Torres

 PAMPANGA STATE AGRICULTURAL UNIVERSITY
Department of Agricultural Business Economics & Entrepreneurship

rim requirements of any column must be exhausted before moving to the right next
column.
b. Check to see that all rim requirements have been satisfied.

The Initial Solution

From To Project A Project B Project C Plant Capacity

WA 4 WB 8 WC 8
Plant W 56 56
XA 16 XB 24 XC 16
Plant X 16 66 82
YA 8 YB 16 YC 24
Plant Y 36 41 77
Project requirements 72 102 41
215 215

Source–destination Quantity Unit Total

X = WA WB
Combination shipped Cost Cost
56 - +
WA 56 $4 224 XA + XB –
XA 16 16 256 16 66
XB 66 24 1,584
YB 36 16 576
YC 41 24 984
Total transportation Cost 3,624

Step 3: Test the solution for improvement.

Improvement index for square WB = WB – WA + XA – XB

= 8 – 4 + 16 – 24 = -4

` This means that for every truckload shipped form Plant W to project B, transportation
cost would be reduced by $4.

For YA = YA – XA + XB - YB
= 8 – 16 + 24 - 16
=0

For WC = WC – WA + XA - XB + YB –YC
= 8 – 4 + 16 – 24 + 16 – 24
= -12

For XC = XC – XB + YB –YC
= 16 – 24 + 16 – 24
= -16

Management 181 Quantitative Business Analysis by: Prof. Leslie V. Torres

 PAMPANGA STATE AGRICULTURAL UNIVERSITY
Department of Agricultural Business Economics & Entrepreneurship

Step 4: Development the improved solution

To select among the unused squares, chose the most negative improvement index,
wherein it is 16. Determine the smallest stone in a negative position in the closed path.

XB XC Note: The stepping-stone method was used to

66-41=25 0+41=41 eliminate each unused square. If any
YB YC improvement index is negative, the best solution
36+41=77 41-41=0 has not yet attained.

Second calculation

From To Project A Project B Project C Plant Capacity

WA 4 WB 8 WC 8
Plant W 56 56
XA 16 XB 24 XC 16
Plant X 16 25 41 82
YA 8 YB 16 YC 24
Plant Y 77 77
Project requirements 72 102 41 215 215

Shipping Quantity Unit Total

X =
Assignments shipped Cost Cost
WA 56 $4 224
XA 16 16 256
XB 25 24 600
XC 41 16 656
YB 77 16 1232
Total transportation Cost 2,968

Unused Computation of
square Improvement index
WB 8 – 4 + 16 – 24 = -4
WC 8 – 4 + 16 -16 = 4

YA 8 – 16 + 24 – 16 = 0
YC 24 – 16 + 24 -16 = 16

WA WB
56-25 = 31 0+25 = 25
XA XB
16+25 = 41 25-25 = 0

Management 181 Quantitative Business Analysis by: Prof. Leslie V. Torres

 PAMPANGA STATE AGRICULTURAL UNIVERSITY
Department of Agricultural Business Economics & Entrepreneurship

Third the solution

From To Project A Project B Project C Plant Capacity

WA 4 WB 8 WC 8
Plant W 31 25 56
XA 16 XB 24 XC 16
Plant X 41 41 82
YA 8 YB 16 YC 24
Plant Y 77 77
Project requirements 72 102 41 215 215

Shipping Quantity Unit Total

X =
Assignments shipped Cost Cost
WA 31 $4 124
WB 25 8 200
XA 41 16 656
XC 41 16 656
YB 77 16 1,232
Total transportation Cost 2,868

Unused Computation of
square Improvement index
WC 8 – 4 + 16 – 16 = 4
YB 24 – 8 + 4 -16 = 4

YA 8 – 4 + 8 – 16 = -4
YC 24 - 16 +8 – 4 + 16 -16 = 12

WA WB
31-31 = 0 25+31=56

XA XB
41
YA YB
0+31=31 77-31=46

Management 181 Quantitative Business Analysis by: Prof. Leslie V. Torres

 PAMPANGA STATE AGRICULTURAL UNIVERSITY
Department of Agricultural Business Economics & Entrepreneurship

Optimal Solution

From To Project A Project B Project C Plant Capacity

WA 4 WB 8 WC 8
Plant W 56 56
XA 16 XB 24 XC 16
Plant X 41 41 82
YA 8 YB 16 YC 24
Plant Y 31 46 77
Project requirements 72 102 41 215 215

Unused Computation of
square Improvement index
WA 4 – 8 + 16 – 8 = 4
WC 8 – 16 + 16 – 8 + 16 – 8 = 8

XB 24 – 16 + 8 – 16 = 0
YC 24 – 16 + 16 – 8 = 16

Shipping Quantity Unit Total

Assignments shipped
X
Cost
= Cost
WB 56 8 448
XA 41 16 656
XC 41 16 656
YA 31 8 248
YB 46 16 736
Total transportation Cost 2,744

Management 181 Quantitative Business Analysis by: Prof. Leslie V. Torres

 PAMPANGA STATE AGRICULTURAL UNIVERSITY
Department of Agricultural Business Economics & Entrepreneurship

Exercise 3

Solve

Sid Lane hauls oranges between Florida groves and citrus packing plants. His schedule
this week calls for 520 boxes with locations and costs as follows:

Grove Available per Packing plant Requirement per

week week
A 170 W 130
B 250 X 200
C 100 Y 190

Cost Information
From To plant W To plant X To plant Y
Grove A Php 12 Php 8 Php 5
Grove B 11 15 10
Grove C 2 7 6

Use Stepping-stone method to find the lowest transportation cost.

Management 181 Quantitative Business Analysis by: Prof. Leslie V. Torres