Transportation Problem Optimization Guide
Transportation Problem Optimization Guide
4.1 INTRODUCTION
Finding the best shipment plan is the objective of a typical transportation problem. The problem is
to determine how many units should be shipped from each source to each destination (considering
what routes to use and in what capacity) so that all demands are satisfied (if possible) at the
minimum total shipping cost.
A classic transportation model involves the shipment of some homogeneous commodity from m
sources of supply, or origins, to n points of demand, or destinations.
In the typical problem, each origin can supply any of the destinations. The demand at each
destination may be supplied jointly from a combination of origins or totally from one origin. The
decision variables take the form Xij, ith origin to jth destination.
Each origin usually has a specific capacity, which represents the maximum number of units it can
supply. Each destination has a specific demand, which represents the number of units needed.
Given that each origin may supply units to each destination, some measure of cost or effort of
shipping a unit is specified for each origin-destination combination. This may take the form of
money cost, distance between the two points, or time required to move from one point to another.
A typical problem is concerned with determining the number of units which should be supplied
from each origin to each destination. The objective is to minimize the total transportation or
delivery costs, while ensuring that: (1) the number of units shipped from any origin does not exceed
the number of units available at that origin, and (2) the demand at each destination is satisfied.
Example 4.1:
Farm to Market Road Maintenance: A small village has two locations at which gravel is stockpiled
for use during the rainy season. The gravel is distributed from these two locations to four zones in
the village were maintenance is required. The delegate of Public Works is interested in determining
the minimum cost of allocating gravel supplies during the rainy season. Table 4.1 summarizes the
cost of supplying one tonne of gravel from each stockpile to each zone in the village (expressed in
monetary units (MU)). In addition, stockpile capacities and normal levels of demand for each zone
are indicated in tonnes. Formulate the relevant Linear programming (LP) model.
Table 4.1: Farm to Market Road Maintenance
Zone Supply (tonnes)
A B C D
L1 2MU 3MU 1.5MU 2.5MU 900
L2 4MU 3.5MU 2.5MU 3MU 750
Demand (tonnes) 300 450 500 350
Remarks:
It may be instructive to make some general remarks before solving Example 4.1. This problem
could be represented as follows:
D1 300
S1 c11
900 c12
c14 D2 450
c13
c21 c22
S2 D3
750 c23 500
c24
D4 350
Let cij be the cost of shipping one unit from source i (where i=1, 2) to destination j (where j=1, ...,
4), and if Xij represents the quantity shipped from source i to destination j, suggesting 8 decision
variables, then:
The supply (SS) and demand (DD) constraints generally suggest three possibilities: either SS <
DD, or SS = DD, or SS > DD.
Except otherwise imposed by the problem setting, these three possible situations can be interpreted
as follows:
a) Total Supply < Total Demand, that is, SS < DD. In this case, all the supply will be shipped
from all points i, but not all demand will be satisfied for all destinations j. Such a situation can be
expressed as:
Since SS > DD, for each zone's demand to be satisfied, we need four (=) demand constraints.
• If SS > DD, such a table is balanced by incorporating an artificial destination column to absorb
the excess supply (sometimes labeled a dummy destination). Per unit shipment costs of zero are
usually associated with the destination dummy.
• If SS < DD, such a table is balanced by incorporating a dummy source row to accommodate
the extra demand. Again, per unit shipping costs for the dummy row are set to zero.
Example 4.2:
Balance the following Transportation model tables. Supply and demand are expressed in tonnes and
unit costs in MU. Unit costs are presented in square brackets within the table.
Destination D1 D2 D3 Supply
Source
S1 [1] [2] [3]
200
S2 [4] [1] [5]
100
300
80 120 60 260
Demand
Solution: Balance by incorporating a dummy destination column to absorb the access supply.
Source
S1 [1] [2] [3] [0] 200
300
Demand 80 120 60 40(excess SS) 300
(ii) Unbalanced table (the case of excess demand)
Destination D1 D2 D3 Supply
Source
S1 [1] [2] [3] 100
S2 [4] [1] [5] 110
210
80 120 60 260
Demand
Solution: Balance by incorporating a dummy source row to accommodate the extra demand.
Destination D1 D2 D3 Supply
Source
S1 [1] [2] [3] 100
S2 [4] [1] [5] 110
S(dummy) [0] [0] [0] 50
(extra demand)
260
80 120 60 260
Demand
Example 4.3:
Generate the initial solution of Example 4.2 by the Northwest Corner Rule.
EXAMPLE 4.4:
Obtain the initial solution of the following table by the least-cost method.
Destination D E F G Supply
Source
A [1] [5] [3] [4] 100
B [4] [2] [2] [5] 60
C [3] [1] [2] [4] 120
Demand 280
70 50 100 60 280
Destination D E F G Supply RS
Source
A [1] [5] [3] [4] 100 30
70 30 0
B [4] [2] [2] [5] 30 60 30
30 0
C [3] [1] [2] [4] 120 70
50 70 0
Demand 70 50 100 60 280
RD 0 0 30 30
0 0
Once the initial solution is achieved (by any method), a test for optimality is conducted.
Steps (4 and 5): Test for Optimality and possible improvement
The procedure for testing for optimality is analogous to that of the simplex method. A distinction is
made between basic variables, that is, those associated with the occupied cells, and non-basic
variables, that is, those associated with the empty cells.
For each empty cell, the effect of changing it to an occupied cell is examined. If any of these
changes are favourable, the solution is not optimal and a new solution must be found. The solution
to be verified for optimality, however, must be non-degenerate. That is, the number of occupied
cells most = m+n-1, where m = number of sources and n= number of destinations. A degenerate
solution is one in which there are insufficient number of occupied cells to permit testing for
optimality.
Procedures for testing for optimality and improvements include: The stepping-stone and the
modified distribution (MODI) methods. We are going to explore only the stepping-stone method
here.
This is accomplished by first calculating a cell evaluator for each empty cell. A cell evaluator for an
empty cell is a number indicating the change in cost resulting from occupying that cell (i.e.,
shipping one unit through it) rather than one of the currently occupied cells. In other to occupy an
empty cell, a transfer has to be made from a currently occupied cell. Such a transfer, subject to the
supply and demand constraints, will affect an even number of at least four cells envisaged mainly in
a clockwise direction.
Each gaining cell is associated with a positive (+ve) sign and each losing cell is associated with a
negative (-ve) sign. The value of a cell evaluator is the sum of the per unit shipping costs in the
gaining cells less the sum of the per unit shipping costs in the losing cells of the enclosed path. The
enclosed path is the circuit formed by the gaining and the losing cells.
Evaluator of an empty cell = unit costs in gaining cells - unit costs in losing cells.
If the cell evaluator is positive, then the solution cannot be improved via the newly occupied cell.
But if the cell evaluator is negative, then the solution tested is improvable, and therefore, not
optimal. The evaluation process is extended to all empty cells.
If all cell evaluators are positive, then the optimal solution has been achieved, otherwise, check all
the empty cells and select for improvement the one with the largest improvement potential.
(1) Identify the incoming cell, that is, the empty cell to be occupied. In a minimization case, the
incoming cell is located by identifying the most negative cell evaluator. If there are ties, then any
may be selected.
(2) Design an improved solution. Once the incoming cell has been identified, an improvement is
made by shifting as many units as possible, along the enclosed path into the empty cell. The
quantity limit to this shifting process is reached when one of the losing cells in the enclosed path
becomes empty. If two or more cells become empty simultaneously, then a degenerate solution will
result.
In the final solution, if cell evaluators of 0 exist, this indicates the existence of multiple optimal
solutions.
(i) Compute the cell evaluators for all empty cells. This is done by subtracting the unit costs of
the losing cells from that of the gaining cells in the enclosed path.
(ii) If all cell evaluators are non-negative, then the solution is optimal. Otherwise, (a) an
improvement is possible, or (b) an alternative solution exists in the case of 0 evaluators.
(iii) Generating an improved solution involves identifying the incoming cell (that cell with the
largest cost reduction potential for minimization problems) and transferring as much as possible to
it until one of the losing cells along the enclosed path becomes empty.
(iv) The improved solution is then tested. If it is not optimal, another improvement is made.
Eventually, an optimal solution (if any) will be reached.
EXAMPLE
4.5:
Solution: We start by checking whether the solution is non-degenerate. Since the number of
occupied cells = m+n-1 = 3+3-1= 5, the solution is non-degenerate.
Destination D1 D2 D3 Supply
Source
S1 [1] 80 [2] 20 [3] 100
S2 [4] [1] 100 [5] 10 110
S(dummy) [0] [0] [0] 50 50
Demand 80 120 60 260
S1D3 -3
S2D1 4
SD1 5
SD2 4
Since cell S1D3 has a negative evaluator, the initial solution is not optimal. A negative cell evaluator
for a minimization problem implies the possibility for cost reduction by rescheduling the shipping
plan.
Example 4.6:
Improve the non-optimal initial solution of Example 4.5 and test for optimality.
Destination D1 D2 D3 Supply
Source
S1 [1] 80 [2] 20 [3] 100
S2 [4] [1] 100 [5] 10 110
S(dummy) [0] [0] [0] 50 50
Demand 80 120 60 260
Improved solution:
The most improvable empty cell is S1D3 as suggested by its cell evaluator of -3 and the enclosed
path is S1D3 → S2D3 → S2D2 → S1D2.
Select the smallest number (shipment) in the enclosed path. Add this number to all cells with a +ve
sign and subtract it from all cells with a -ve sign.
Destination D1 D2 D3 Supply
Source
S1 [1] 80 - [2] + [3] 100
20-10=10 0+10= 10
S2 [4] + [1] - [5] 110
100+10=110 10-10 = 0
S(dummy) [0] [0] [0] 50
50
Demand 80 120 60 260
Since all empty cells have non-negative evaluators, an optimal solution has been obtained.
New total Cost = Previous total cost + (Sum of cost of gaining cell – Sum of cost of losing cells)
Where = amount allocated along the enclosed
path. Thus, NTC = 270 + 10(4 – 7) =270 – 30 =
240
It is to be noted that the demand requirements in D3 have, indeed not been completely
satisfied, since 50 units are shipped to D3 out of the dummy source S.
4.6. DEGENERACY
A solution to a transportation problem is said to degenerate if less than m+n-1 cells are occupied.
With less than m+n-1 cells occupied, it is not possible to compute cell evaluators. To salvage this
situation, an empty cell is assigned the value which is defined as a very small quantity. The value
is used to bring the number of occupied cells to m+n-1.
The allocation of to an empty cell depends on the method used in generating the initial solution. If
the Northwest-Corner Rule was used, then the empty cell nearest the northwest-corner is assigned .
If the least-cost method was used, then the empty cell with the lowest cost receives .
is disposed of immediately it serves the purpose of ensuring that m+n-1 cells are occupied. Steps
4 and 5 are then implemented as usual.
Example 4.7:
Consider the following transportation situation where S1 and S2 represent sources; D1, D2, and D3
represent destinations.
Destination D1 D2 D3 Supply
Source
S1 [2] [1] [2] 20
S2 [3] [4] [1] 40
Demand 20 15 25 60
(a) Find the optimal shipping plan via the Northwest-corner Rule.
(b) Find the optimal shipping plan via the least-cost method Rule.
Solution to Example 4.6:
(a)
(i) The initial solution by the Northwest-Corner Rule.
(ii) m+n-1 = 4, but there are only 3 occupied cells, this is a case of degeneracy. In order to remedy
the situation, we introduce in cell S1D2 (because it is nearest to the northwest-corner).
Destination D1 D2 D3 Supply
Source
S1 [2] [1] [2] 20
20
S2 [3] [4] 15 [1] 25 40
Demand 20 15 25 60
(iii) Since we now have m+n-1 occupied cells, testing for optimality can then be conducted by
computing cell evaluators.
Empty Cell Cell evaluator
S1D3 (4+2) - (1+1) = 4
S2D1 (3+1) - (2+4) = -2
S2D1 has a negative cell evaluator, hence, suggesting that occupying this route will reduce the total
transportation cost.
Source
S1 [2] [1] [2] 20
5 15+
S2 [3] [4] [1] 25 40
15 0
Demand 20 15 25 60
All the empty cell evaluators are now positive, implying that the optimal solution has
been obtained.
Example 4.8:
Consider a transportation situation in which S1, S2, and S3 are sources; and D1, D2, D3 and D4 are
destinations. The figures within the matrix are unit profits realized from particular transfers. The
problem is to allocate with a view to maximizing total profits.
Destination D1 D2 D3 D4 Supply
Source
Demand 40 30 50 30 150
4.8 TRANSSHIPMENT
Situations are sometimes encountered where it may not be cost-effective or practical to transport
directly from sources to destinations. This is the case when it is necessary for a commodity to pass
through intermediate warehouses before reaching the ultimate destination. This situation is
described as transshipment. A slight modification of such a problem will permit the use of the
standard minimization procedure.
The modification requires working out the cost of supplying each demand centre from each
supply point via all possible routes. The least costly route to each destination from each source is
then selected and registered in the matrix. The standard minimization procedure can now be
followed.
Example
4.9:
UCB has decided to introduce a new product. The new product may be distributed though any
combination of the two warehouses belonging to the company, W1 and W2. The available annual
capacities for the new product are:
The unit production costs amount to 3MU, 4MU and 1MU at S1, S2, and S3, respectively. The unit
handling costs at the warehouses amount to 2MU and 3MU at W1 and W2, respectively. The unit
shipping cost from plant to warehouse and unit delivery costs from warehouse to customer are
as
follows
:
W1 W2 D1 D2 D3
S1 6 6 W1 3 5 8
S2 5 5 W2 5 3 9
S3 13 4
All cost are expressed in monetary units
(a) Determine the optimal production and distribution schedule
(b) Assuming that each warehouse can handle a maximum of 200 units a year, explain why
it would be incorrect to solve the problem using the transportation technique to
obtain a solution to the flow between plant and warehouse and then apply the technique
again to the flows between the warehouses and the customer.
Exercises on Chapter 4
;1) Given a transportation problem (with cost coefficients):
Destination D E F G Supply
Source
Demand
70 50 100 60