Module Code: BM2016

Operations
Management
Lesson 9: Transportation Model

Ruwanthika Chandrasiri
MBA (PIM-SJP), B.Sc. (Wyb) Spc.in Agricultural
Economics and Business, Certificate in Productivity (NPS),
FHRM (IPM)
 Introduction
The main objective is to transport a product from various sources to various
destinations at total minimum cost.

In Transportation Models, the sources and destinations are known, the supply
and demand at each source and destinations are also known.

It is designed to find the best arrangement for transportation such that the
transportation cost is minimum.
For example:

Consider three companies (Company1, Company2 and Company3) which produce mobile
phones and are located in different regions.

Similarly, consider three cities (namely City A, City B & City C) where the mobile phones are
transported.

The companies where mobile phones are available are known as sources and the cities
where mobile phones are transported are called destinations.

Let, Let,

Company1 produces a1 units, demand in City A is b1 units,

Company2 produces a2 units, demand in City B is b2 units,
Company3 produces a3 units. demand in City C is b3 units.
The cost of transportation from each source to destination is given in table

Destinations
City A City B City C Supply
Comp 1 C1A C1B C1C a1
Source
Comp 2 C2A C2B C2C a2
Comp 3 C3A C3B C3C a3
Demand b1 b2 b3 Σai = Σbi

The transportation of mobile phones should be done in such a way that the total
transportation cost is minimum.
Types of transportation problems
There are two types of transportation problems:
i) Balanced transportation problem: The sum of supply and sum of demand are
same.

Σ Supply=Σ Demand
ii) Unbalanced transportation problem: The sum of supply and sum of demand
are different.

Σ Supply = Σ Demand
  Balanced Transportation Problem

Types of
Transportation
Problems
 Unbalanced Transportation Problem

6
Industrial applications of Transportation Model

• Minimize the transportation cost from source to destination.

• Determine lowest cost location for new industries, offices, warehouse, etc.
• Determine the number of products to be manufactured according to demand.
• Courier Services: Helps in taking proper decisions to find the best route for
transportation.
Methods to solve Transportation Model

1. North-West corner method

2. Least cost method
3. Vogel's Approximation Method (VAM)
4. UV Method
1. North-West Corner Method
The North West corner method is one of the methods to obtain a basic feasible solution of
the transportation problems
Q:

A mobile phone manufacturing company has three branches located in three different
province, say Western, Southern and North. The company has to transport mobile phones to
three destinations, say Galle, Kandy and Jaffna. The availability from Western, Southern and
North is 40, 60 and 70 units respectively. The demand at Galle, Kandy and Jaffna are 70, 40 and
60 respectively. The transportation cost is shown in the matrix below (in Rs). Use the North-
West corner method to find a basic feasible solution (BFS).
Destinations
Galle Kandy Jaffna
Western 4 5 1
Sources Southern 3 4 3
North 6 2 8
 Destinations
Galle Kandy Jaffna Supply
Western 4 5 1 40
Sources Southern 3 4 3 60
North 6 2 8 70
Demand 70 40 60
Steps

1: Balance the problem

2: Start allocating from North-West corner cell

3: Remove the row or column whose supply or demand is fulfilled and

prepare a new matrix

4: Repeat the procedure until all the allocations are over

5: After all the allocations are over, write the allocations and calculate
the transportation cost
North-West
Corner Rule
Q2:

12
 2. UV Method
There are two phases to solve the transportation problem.

• First phase - The initial basic feasible solution

• Second phase - Optimization of the initial basic feasible solution that was obtained in the
first phase

There are several steps to follow.

Step 1: Check whether the problem is balanced or not.
Step 2: Finding the initial basic feasible solution.
Step 3: U-V method to optimize the initial basic feasible solution.
Step 4: Find Ui and Vi values

ui + vj = Cij

Where Cij is the cost value only for the allocated cell.

Before applying the above formula we need to check whether

m + n – 1 = the total number of allocated cells

or not where m is the total number of rows and n is the total number of
columns.
Step 5: Now, compute penalties using the below formula only for unallocated cells.

Pij = ui + vj – Cij

The Rule: If we get all the penalties value as zero or

negative values that mean the optimality is reached and
this answer is the final answer.
Step 6: If we get any positive value means we need to proceed with the sum in
the next step

Step 7: Now find the maximum positive penalty.

In the example here the maximum value is 6 which corresponds to C21 cell. Now this cell is new basic cell.

Rule : Right angle turn is not

permitted
Step 8: Assign alternate plus-minus sign to all the cells within the loop with plus sign
assigned at the new basic cell

Step 9: Consider the cells with a negative sign. Compare the allocated value (i.e. 200 and 250 in this case)
and select the minimum (i.e. select 200 in this case). Now subtract 200 from the cells with a minus sign and
add 200 to the cells with a plus sign. And draw a new iteration. The work of the loop is over and the new
solution looks as shown below.
Steps 10: Again find u values and v values using the formula ui + vj = Cij where Cij is the cost
value only for allocated cell.

Steps 11: Find the penalties for all the unallocated cells using the formula Pij = ui + vj – Cij.

Steps 12: Repeat till all the penalty values are negative. Then the optimality is reached.

Steps 13: Now find the transportation Cost