TRANSPORTATION PROBLEM (TP)

4.1 MEANING OF TRANSPORTATION PROBLEM

The transportation problem involves finding the lowest-cost plan for distributing stocks of goods
or supplies from multiple origins that supply the goods to multiple destinations that demand the
goods. For instance, a firm might have three factories, all of which are capable of producing
identical units of the same product, and four warehouses that stock or demand those product.
The transportation model can be used to determine how to allocate the supplies available from
the various factories to the warehouses that stock or demand those goods, in such a way that total
shipping cost is minimized (i.e., the optimal shipping plan). Usually, analysis of the problem will
produce a shipping plan that pertains to a certain period of time (day, week, month), although
once the plan is established, it will generally not change unless one or more of the parameters of
the problem (supply, demand, unit shipping cost) changes.
The supply points can be factories, warehouses, departments, or any other place from which
goods are sent. Destinations can be factories, warehouses, departments, or other points that
receive goods. The transportation model is one of a class of linear programming models, so
named because of the linear relationships among variables. In the transportation model,
transportation costs are treated as a direct linear function of the number of units shipped.

Use of the transportation model implies that certain assumptions are satisfied. The following
are the major ones:
1. A list of the origins and each one’s capacity or supply quantity per period.
2. A list of the destinations and each one’s demand per period.
3. The unit cost of shipping items from each origin to each destination.
4. The items to be shipped are homogeneous (i.e., they are the same regardless of their source or
destination).
5. Shipping cost per unit is the same regardless of the number of units shipped.
6. There is only one route or mode of transportation being used between each origin and each
destination.
The classical transportation problem can be stated mathematically as follows
Let ai - quantity of product available at origin i
bj - quantity of product required at destination j
 cij - the cost of transporting one unit of product from origin i to destination j
xij – the quantity transported from origin i to destination j
Basic terms in transportation problem
i. Feasible solution: a set of non-negative values x ij, i = 1, 2,….m and j= 1, 2,…..n that
satisfy the constraint
ii. Basic feasible solution: a feasible solution that contains not more than m+n -1(m= no
of rows, n = no of columns) non-negative allocation
iii. Degeneracy: this occurs when the number of allocation is less than m+n -1, therefore
we cannot achieve an optimal solution. Then it is necessary to make one or more zero
allocation to bring up the number of allocation to m+n -1
iv.
4.2 Methods of solving transportation problem
Solving transportation problem involves obtaining two possible solutions which include
i. Initial feasible solution
ii. Optimal solution
For the purpose of this class, we will concentrate only on solving initial solution
There are three methods under solving for initial solution. They are
a) Northwest corner rule method
b) Least cost method
c) Vogel approximation method

4.3 NORTHWEST CORNER RULE

This method starts allocation from north-west corner of the matrix. The steps include
Step 1: starting with the cell at the upper left corner of the matrix, we allocate as much possible
so that either the capacity of the first row is exhausted or the destination requirement of the first
column is satisfied i.e. X11 = min (a1, b1)
Step 2: if b1> a1, we move down vertically to the second row and make the second allocation of
magnitude X21 = min (a2, b1 - X11) in the cell (1, 2)
If b1< a1, we move right horizontally to the second column and make the second allocation of
magnitude X12 = min (a1 - X11, b2) in the cell (2,1)
If b1= a1, there is a tie for the second allocation, one can make the second allocation of magnitude
X12 = min (a1 - a1, b1) = 0 in the cell (1,2)
Or
X21 = min (a2 b1-b1) = 0 in the cell (2,1)
Step iii: repeat step i and ii moving down towards the lower right corner of the table until all the
requirement are satisfied.
Step iv: If ∑ai = ∑bi i.e demand and supply, then it is a balance TP and there exist a feasible
solution.
Example 4.1 : Calculate the transportation cost using the North west corner rule
To E F G H Suppl
y
From

A 12 10 12 13 500

B 7 11 8 14 300

C 6 16 11 7 200

Demand 180 150 350 320 1000

Solution
Following the above steps, the obtained the below table
To E F G H Suppl
y
From

A 180 150 170 13 500

12 10 12

B 7 11 180 120 300

8 14

C 6 16 11 200 200

Demand 180 150 350 320 1000

The solution is optimal since it meets the m+n-1 requirement (3 +4-1 = 6 cells are occupied). We
proceed to calculate the transportation cost as shown below
Transportation cost is derived by multiplying the unit cost by the number of allocations
12 x 180 = N2,160
10 x 150 = N1,500
12 x 170 = N2,040
8 x 180 = N1,440
14 x 120 =N1,680
7 x 200 = N1,400
Total N10, 220
Note: The Northwest corner method of obtaining initial feasible solution is relatively simple but
not considered very efficient in terms of cost minimising. This is because it takes into account
only the available supply and demand requirements in making assignment and takes no account
of the transportation cost involved. Thus it ignored the cost factor which is sought to be
minimised
Least Cost Method
This method entails making allocations at each step by selecting from the routes available , the
one with the minimum cost
Steps involved
Step 1: Determine the smallest cost in the cost matrix i.e. C ij. Allocate xij = Min (ai, bj) in the cell
(i, j). However, there may be a tie in the minimum cost, such that two or more routes may have
the same least cost of transporting. Then either of them may be selected. But a better initial
solution is obtained if the route choosen is one where the largest quantity can be assigned.
Step 2: If xj =ai, cross off the ith row of the table and decrease b j by ai. Then proceed to the next
step
Step 3: If xij = bj, cross off the jth column and decrease by ai by bj. procedd to the next step
If xij =ai = bj, cross off either the ith row or jth column but not both
Step 4: Repeat step 1 and 2 for the resulting reduced table until all the requirements are satisfied.

From Example 4.1, the initial feasible solution/allocations using the least cost method is
presented below
To E F G H Suppl
y
From

A 12 150 50 300 500

10 12 13

B 7 11 8 14 300
 300

C 180 16 11 20 200

6 7

Demand 180 150 350 320 1000

The total transportation cost is calculated below

10 x 150 = N1, 500
12 x 50 = N600
13 x 300 = N3,900
8 x 300 = N2,400
6 x 180 = N1,080
7 x 20 = N140
Total N9, 620
Vogel approximation method (VAM)
This is another cost based method used for obtaining initial solution to a transportation problem.
Actually, it uses cost differentials rather than absolute costs to select the appropriate cell to make
allocations.

Procedures;
Step 1: in each row and column, calculate penalty by taking differences between two least cost
cells
Step 2: identify the largest difference, be it row or column.in case of a tie, either of them may be
chosen but it is preferred to choose the cost difference corresponding to which cell has the
minimum cost
Step 3: allocate as much possible in the lowest cost cell of the row r column with the largest
difference
Step 4: in case the allocation is made fully to a row or column, ignore that row or column from
further consideration by crossing it
Step 5: repeat step 1 and 2
Step 6: carry on the procedure until rows and columns have been crossed out, i.e. allocation is
complete
Example: from example 4.1. The transportation cost table using VAM is presented below
To E F G H Supply
From I II III

A 12 150 230 120 500 2 2 2

10 12 13

B 180 11 120 14 300 1 1 3

7 8 120

C 6 16 11 200 200 1 - -

Demand 180 150 350 320 1000

230 120

I 1 1 3 6*

II 5* 1 4 1

II - 1 4* 1

*- the greatest difference

Initial feasible solution using VAM

To E F G H Supply
 From

A 12 150 230 120 500

10 12 13

B 180 11 120 14 300

7 8

C 6 16 11 200 200

Demand 180 150 350 320 1000

10 x 150 = N1, 500

12 x 230 = N2, 760
13 x 120 = N1,560
7 x 180 = N1, 260
8 x 120 = N960
7 x 200 = N1400
Total N9, 440
The Vogel approximation method is also called the penalty method because the cost differences
that it uses are nothing but the penalties of not using the least cost routes. Since the objective
function is the minimization of the transportation cost, in each iteration, the route is selected
which involves maximum penalty of not being used.
In addition, the initial solution obtained by VAM is found to be the best of all as it involves the
lowest total cost among all the three initial solution. Usually, VAM provides the best solution,
therefore, the method is generally preferred in solving the problem.