Transportation

Models
B Y: AAT MA M AH AR AJ H
Outline
• Transportation and modes of transport
• Transportation and Supply Chain Management
• Transportation Modelling
• Special Issues in Modelling
Transportation and modes of transport
• Transportation: movement of a product from one location to another as it makes
its way to the end-use customer.

• Different methods of transportation include:

• Rail
• Trucking
• Air
• Package Delivery
• Water
• Intermodal
• Pipeline
Comparison of Modes of Transports
Method of Transport Features/Comments
Rail • Low-value, high-density, bulk products, raw materials, intermodal containers
• Not as economical for small loads, slower, less flexible, than trucking
Trucking • Small loads, point-to-point service, flexible
• More reliable, less damage than rails; more expensive than rails for long distance
Air • Most expensive and fastest mode of freight transport
• Lightweight, small packages ≤500 lbs
• High-value, perishable and critical goods
• Less theft
Package Delivery • Small packages
• Fast and reliable
• Increased with e-business; primary shipping mode for internet companies
Water • Low-cost shipping mode
• Primary means of international shipping
• Slowest shipping method
Intermodal • Combines several modes of shipping-truck, water and rail.
• Key component is containers
Pipeline • Transport oil and products in liquid form
• High capital cost, economical use
• Long life and low operating cost
Transportation and Supply Chain
Management
• We previously looked at the role of globalisation on operations
management.

• Supply Chain Management is an important facet of operations

management

• To compete globally requires an effective supply chain.

Obstacles to Global Supply Chain
Management
• Increased documentation for invoices, cargo insurance, letters of credit,
ocean bill of lading or air waybills, and inspection

• Ever changing regulations that vary from country to country that govern
the import and export of goods

• Trade group, tariffs, duties and landing costs

• Limited shipping modes

Obstacles to Global Supply Chain
Management
• Differences in communication technology and availability

• Government codes and reporting requirements that vary from

country to country

• Numerous players, including forwarding agents, customs house

brokers, financial institutions, insurance providers, multiple
transportation carriers and government agencies
Protectionism and Transportation

• Class Discussion: Discuss the role of terrorism, piracy and the recent
trend towards protectionism has had on global trade and transport.
Transportation Modelling
• An iterative procedure for solving problems that involve minimizing the cost
of shipping products from a series of sources to a series of destinations.

• Class of linear programming models.

• Model requires:
1. The origin points and the capacity and supply per period at each.
2. The destination points and the demand per period
3. The cost of shipping one unit from each origin to each destination
Example of Transport Model
From (Max Capacity)\ Albuquerque Boston Cleveland
To
Des Moines (100) $5 $4 $3
Evansville (300) $8 $4 $3
Fort Lauderdale (300) $9 $7 $5
Warehouse 300 200 200
requirement
Transportation Modelling: Initial Solution
• Three methods are considered:
• Northwest-corner Rule: A procedure in the transportation model where one
starts at the upper left-hand cell of a table (the northwest corner) and
systematically allocates units to shipping routes.
• Intuitive method: Also known as the minimum cost method, a cost-based
approach to finding an initial solution to a transportation problem.
• Vogel’s Method: otherwise known as the Vogel Approximation Method (Shenoy,
Srivastava & Sharma, 2001) is a method in which the difference between two
least values for each row and column is obtained and quantity assigned to the
least cost cell of the row/column with the largest difference. (Vohra, 2007)
Northwest-Corner Rule: Steps
• Start in the upper left-hand cell of the table and allocate units to
shipping route as follows:
1. Exhaust the supply of each row before moving down to the next row.
2. Exhaust the requirements of each column before moving to the nect column
on the right
3. Check to ensure all supplies and demands are met.
Northwest-Corner Rule: Example
From\To (A) Albuquerque (B) Boston (C) Cleveland Factory Capacity
(D) Des Moines 100 $5 $4 $3 100
(E) Evansville 200 $8 100 $4 $3 300
(F) Fort $9 $7 $5
Lauderdale 100 200 300
Warehouse 300 200 200 700
Requirements
Northwest-Corner Rule: Example
Route
From To Tubs Shipped Cost Per Unit Total Cost ($)
($)

D A 100 5 500
E A 200 8 1,600
E B 100 4 400
F B 100 7 700
F C 200 5 1,000
Total 4,200
The Intuitive Lowest-Cost Method: Step
1. Identify the cell with the lowest cost. Break any ties for the lowest
cost arbitrarily.
2. Allocate as many units as possible to that cell without exceeding
the supply or demand. Then cross out that row or column (or both)
that is exhausted by this assignment.
3. Find the cell with the lowest cost from the remaining (not crossed
out) cells.
4. Repeat steps 2 and 3 until all units have been allocated.
The Intuitive Lowest-Cost Method: Example
From\To (A) Albuquerque (B) Boston (C) Cleveland Factory Capacity
(D) Des Moines $5 $4 100 $3 100
(E) Evansville $8 200 $4 100 $3 300
(F) Fort $9 $7 $5
Lauderdale 300 300
Warehouse 300 200 200 700
Requirements

Total Cost = $4,100

Vogel’s Method: Steps
1. Calculate the difference between the two lowest transportation costs for each
row and column. These are written by the side of each row and column and are
known as row and column penalties.
2. Select the row or column with the largest penalty and circle this value. In case
of a tie, select that row or column that allows the greatest movement of units.
3. Assign the largest possible allocation the restrictions of the row and column
requirements to the lowest cost cell for the row or column selected in step 2.
4. Cross out any column or row satisfied by the assignment made in the prior step
5. Repeat step 1-4 unit all allocations have been made.
(Shenoy, Srivastava & Sharma, 2001)
The Stepping-Stone Method: Steps
1. Select any unused square to evaluate.
2. Beginning at this square, trace a closed path back to the original square via squares that
are currently being used (only horizontal and vertical moves are permissible). You may,
however, step over either an empty or an occupied square.
3. Beginning with a plus (+) sign at the unused square, place alternate minus signs and plus
sign on each corner square of the closed path just traced.
4. Calculate an improvement index by first adding the unit-cost figures found in each square
containing a plus sign, and then by subtracting the unit costs in each square containing a
minus sign.
5. Repeat steps 1 through 4 until you have calculated an improvement index for all unused
squares. If all indices computed are greater than or equal to zero, you have reached and
optimal solution. If not, the current solution can be improved further to decrease total
shipping costs.
The Stepping-Stone Method: Example
From\To (A) Albuquerque (B) Boston (C) Cleveland Factory Capacity
(D) Des Moines 100- $5 + $4 $3 100
(E) Evansville 200 $8 100 $4 $3 300
+ -
(F) Fort $9 $7 $5
Lauderdale 100 200 300
Warehouse 300 200 200 700
Requirements

Result of proposed shift in allocation = 1 x $4 – 1 x $5 + 1 x $8 – 1 x $4 = +$3

The Stepping Stone Method: Example
• The ideal solution is:

From\To (A) Albuquerque (B) Boston (C) Cleveland Factory Capacity

(D) Des Moines 100 $5 $4 $3 100
(E) Evansville $8 200 $4 100 $3 300
(F) Fort 200 $9 0 $7 100 $5 300
Lauderdale
Warehouse 300 200 200 700
Requirements
Special Issues in Modelling
• Demand not equal to supply leading to unbalanced problems

• Solved using “Dummy Sources” or “Dummy Destination”

• Dummy Sources: Artificial shipping source points created in the transportation method
when total demand is greater than total supply in order to effect a supply equal to the
excess of demand over supply

• Dummy Destination: Artificial shipping source points created in the transportation

method when total supply is greater than total demand; they serve to equalise the total
demand and supply
 Special Issues in Modelling
• Assuming the capacity of factory capacity of Des Moines facility is
250, the initial solution per NW Corner Rule would look as follows:

From\To (A) (B) Boston (C) Cleveland Dummy Factory

Albuquerque Capacity
(D) Des Moines 250 $5 $4 $3 $3 250
(E) Evansville 50 $8 200 $4 50 $3 $3 300
(F) Fort Lauderdale $9 $7 150 $5 150 $5 300
Warehouse 300 200 200 150 700
Requirements
Special Issues in Modelling
• Degeneracy: An occurrence in transportation models when too few
squares or shipping routes are being used so that tracing a closed
path for each unused square becomes impossible.