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1251Specially Structured Linear Programmes I : Transportation and

Transhipment Problems

A typical transportation problem is like this. Suppose that a manufacturer of refrigerators


has three plants situated at places called A, B, and C. Suppose further that his buyers are
located in three regions X, Y and Z where he has to supply them the goods. Also, assume
that the demands in the three regions and the production in different plants per unit time
period are known and equal in aggregate, and further that the cost of transporting one
refrigerator from each plant to each of the requirement centers is given and constant. The
manufacturer’s problem is to determine as to how he should route his product from his
plants to the market places so that the total cost involved in the transportation is
minimized. In other words, he has to decide as to how many refrigerators should be
supplied from A to X, Y and Z; how many from B to X, Y, and Z and how many from C to
X, Y, and Z, to achieve it at the least cost. This is illustrated in Figure given below:

PLANT MARKET
ROUTES
A X

Supply B Y Demand

C Z

Figure – Transportation Problem


The places where the goods originate from (the plants in our example) are called the
sources or the origins and places where they are to be supplied are the destinations. In
this terminology, the problem of the manufacturer is to decide as to how many units be
transported from different origins to different destinations so that the total transportation
cost is the minimum.

PROBLEM STATEMENT

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 source/origin i to destination
j
x ij = the quantity transported from origin i to destination j

m n

Assume that ∑a
i =1
i = ∑b j which means that the total quantity available at the origins is
j =1

precisely equal to the total amount required at the destinations.

With these, the problem can be stated as a linear programming problem as:
m n

Minimize Total Cost, Z = ∑∑cij xij


i =1 j =1

Subject to
n

∑x
j =1
ij = αi for i = 1,2….,m

∑x
i =1
ij = bj for j = 1,2….,n

and xij ≥ 0 for all i =1,2…,m, and


j =1,2,…,n
The transportation model can also be portrayed in a tabular form by means of a
transportation tableau, shown in table given below.

Table – Transportation Tableau

Destination (j)
Origin (i) 1 2 N Supply, ai

1 x11 x12 x1n a1


c11 c12 … c1n

x 22 … a2
2 x 21 c 22 x2n
c 21 c2n
… … … … … …
m … am
x m1 xm 2 x mn
c m1 cm 2 c mn
Demand, b j b1 b2 … bn ∑a i = ∑b j

This tableau can be thought of as a matrix within a matrix, of the dimension m x n. The
one is the per unit cost matrix which represents the unit transportation costs for each of
the possible transportation routes. Its elements are given by cij , indicating the cost of
shipping a unit from the ith origin to the jth destination. Superimposed on this matrix is
the matrix in which each cell contains a transportation variable-that is, the number of
units shipped from the row-designated origin to the column designated destination. Each
such variable is represented by xij , the amount shipped from ith source to jth
destination. Right and bottom sides of the transportation tableau show, respectively, the
amount of supplies a i available at source i and the amount demanded b j at each
destination j. The a i ' s and b j ' s represent the supply and demand constraints.

The aggregate transportation cost is determined by multiplying the various x ij ' s with
corresponding cij ' s and then adding them up all. The solution to the transportation
problem calls for determining values of x ij ' s as would yield the minimum aggregate
transportation cost. When a problem is solved, some of the x ij ' s would assume positive
values indicating utilized routes. The cells containing such values are called occupied or
filled cells and each of them represents the presence of a basic variable. For the
remaining cells, called the empty cells, xij ' s would be zero. These are the routes that
are not utilized by the transportation pattern and their corresponding variables ( xij ' s )
are regarded to be non-basic.

Remember that the transportation costs are assumed to be linear in nature. Further, it is
assumed here that the aggregate supply at sources ( ∑ai ) is equal to the aggregate
demand at destinations ( ∑b j ) . We shall consider later the situation when they do not
match.

As observed earlier, the number of constraints in a transportation tableau is m + n (the


number of rows plus the number of columns). The number of variables required for
forming a basis is one less, i.e., m + n – 1. This is so, because there are only m + n –1
independent variables in the solution basis. In other words, with values of any m + n –1
independent variables being given, the remaining would automatically be determined on
the basis of those values. Also, considering the conditions of feasibility and non-
negativity, the number of basic variables representing transportation routes that are
utilized equals m + n –1, and all other variables be non-basic, or zero, representing the
unutilized routes. It means that a basic feasible solution of the transportation problem has
exactly m + n –1 positive components in comparison to the m + n positive components
required for a basic feasible solution in respect of a general linear programming problem
in which there are m + n structural constraints to satisfy.

Solution to the Transportation Problem

A transportation problem can be solved by two methods, using (a) simplex method, and
(b) transportation method. We shall illustrate these with the help of an example.

Example

A firm owns facilities at six places. It has manufacturing plants at places. A, B and C
with daily production of 50, 40 and 60 units respectively. At point D, E, and F it has
three warehouses with daily demand of 20, 95, and 35 units respectively. Per unit
shipping costs are given in the following table. If the firm wants to minimize its total
transportation cost, how should it route its products?

Warehouse
____________________________________
D E F
A 6 4 1
Plant B 3 8 7
C 4 4 2

(a) The simplex method - The given problem can be express as an LPP as follows:
Let xij represent the number of units shipped from plant i to warehouse j. With
Z representing the total cost we can state the problem as follows.

Minimize Z = 6 x11 + 4 x12 + 1x13 + 3 x 21 + 8 x 22 + 7 x 23 + 4 x31 + 4 x32 + 2 x33


Subject to
x11 + x12 + x13 = 50
x 21 + x 22 + x 23 = 40 Supply constraints
x31 + x32 + x33 = 60

x11 + x 21 + x31 = 20
x12 + x 22 + x32 = 95 Demand constraints
x13 + x 23 + x33 = 35

xij ≥ 0 for i = 1, 2, 3 and j = 1, 2, 3

Now, this problem can be solved as any other problem using the simplex algorithm. But
the solution is going to be very lengthy and a cumbersome process because of the
involvement of a large number of decision and artificial variables. Hence, we look for an
alternate solution procedure called the transportation method which is an efficient one
that yields results faster and with less computational effort. A significant point of
difference between the simplex and the transportation methods is regarding the
determination of initial basic feasible solution. As we use simplex method to solve a
minimization problem, we must add artificial variables to make the solution artificially
feasible. As we progress from one tableau to another, the artificial variables are dropped
one after the other as they become non-basic. Then, eventually an optimal solution is
obtained where all the artificial variables are excluded. The transportation method
obviates the need to use artificial variables because with this method it is fairly easy to
find an initial solution that is feasible, without using the artificial variables.

(b) The transportation method - The transportation method is shown schematically


in Figure 1. The method consists of the following three steps:

(i) Obtaining an initial solution, that is to say making an initial assignment in such a
way that a basic feasible solution is obtained; (ii) ascertaining whether it is
optimal or not, by determining opportunity costs associated with the empty cells,
and if the solution is not optimal; (iii) revising the solution until an optimal
solution is obtained.

Step 1 : Obtaining the initial feasible solution. The first step in using the
transportation method is to obtain a feasible solution, namely, the one that
satisfies the rim requirements (i.e. the requirements of demand and supply). The
initial feasible solution can be obtained by several methods. The commonly used
are the North-West Corner (NWC) Rule, Least Cost Method (LCM) and the
vogel’s Approximation Method (VAM). We shall discuss these methods in turn.

1. North-West Corner Rule. The North-West Corner rule (N-W Corner rule) may be
stated as follows. Start with the north-west corner of the transportation tableau
and consider the cell in the first column and the first row. Corresponding to this
cell are the values a1 and b1 respectively in row 1 and column 1. Proceed as
follows:

If a1 > b1 , then assign quantity b1 in this cell. This implies that we put x11 = b1 .
If a1 < b1 , then assign a1 in the cell so that x11 = a1 . Simply speaking, put the
lower of a1 and b1 as x11 . If a1 = b1 , then x11 = a1 = b1 . To illustrate, if
supply a1 = 50 and demand b1 =30, then assign 30 units as the quantity to be
supplied from first source to the first destination. If supply, a1 =30 and demand
b1 =50, the x11 = a1 =30 and if a1 =30, b1 =30, then x11 = 30 .

Now, if a1 < b1 , then move horizontally to the next column in the first row, if a1 < b1 ,
move vertically in the same column to the next row; and if a1 = b1 , then move
diagonally to the next column and next row. In operational terms, if a1 > b1 , so that the
supply is greater than demand, then having assigned quantity equal to demand ( b1 ), the
remaining quantity is considered alongwith demand at the next destination ( b2 ), whereas
if supply falls short of demand ( a1 < b1 ), then having exhausted the available supply at
source 1, consider obtaining from the next source ( a 2 ). Obviously, if supply and
demand match, then consider the next source and next destination ( a 2 andb 2 ).

Once is the next cell, again compare the supply available at the source and demand at the
destination, corresponding to the cell chosen, and assign lower of the two values. Move
to the next cell appropriately as explained earlier and again assign the quantity
considering demand and available supply.

Continue in the zig zag manner until the last source and last destination are covered, so
that the south-east corner of the tableau is reached.

For example, the initial basic feasible solution using this method is obtained as follows.
First start with the cell on the intersection of A and D. The column total corresponding to
this cell is 20 while the row total is 50. So allocate 20 to this cell. Now, the destination
requirement having been satisfied, move horizontally in the row to the cell AE. The
column total is 95 while a total of 30 is left in the row. Thus assign 30 to this cell. With
this, the supply of the row origin is exhausted. Next, move vertically to the cell BE. For
this cell, the destination requirement being 65 and the source supply being 40, assign 40
to this cell and exhaust the supply at source B. Then move to the cell CE and allocate 25
units. The remaining supply of 35 at source C is sufficient to meet the demand at
destination F. So assign 35 to the cell CF. These assignments are shown in Table given
below.

Table 2 – Initial Basic Feasible Solution – NW Corner Method

D E F Supply
To

From
A 20 30
6 4 1 50
B 3 40 7 40
8
C 4 25 35 60
4 2
Demand 20 95 35 160

Total cost : 6 x 20 + 4 x 30 + 8 x 40 + 4 x 25 + 2 x 35 = Rs.730

This routing of the units meets all the rim requirements and entails 5(=3 + 3 –1)
shipments as there are 5 occupied cells. It involves a total cost of Rs.730.

2. Least Cost Method (LCM). The NW corner rule described earlier considers only
the availability and supply requirements in making assignments. It takes no
account of the shipping costs given in the tableau. It is therefore not a sound
method as it ignores the very factor (cost) which is sought to be minimized. The
least cost method and the Vogel’s Approximation method consider the shipping
costs while making allocations. The former of these is discussed below.
As the name suggests, of all the routes (that is, combinations of sources and destinations)
select the one where shipping cost is the least. Now, consider the supply available at the
corresponding source and demand at the corresponding destination and put the lower of
the two as the quantity to be transported through that route. After this, delete the
source/destination, whichever is satisfied. Consider the remaining routes and again
choose the one with the smallest cost and make assignments. Continue in this manner
until all the units are assigned.

It may be mentioned that at any stage, if there is a tie in the minimum cost, so that two or
more routes have the same least cost of shipping, then, conceptually, either of them may
be selected. However, a better initial solution is obtained if the route chosen is the one
where largest quantity can be assigned. Thus, if there are three cells for which the (least)
cost value is equal, then consider each one of these one by one and determine the quantity
(by reference to the demand and supply quantities given) which can be dispatched, and
choose the cell with the largest quantity. If there is still a tie, then either of them may be
selected.

For example table given above, the initial solution by using least cost method is obtained
in Table given below. To begin with, the lowest of all cost elements is 1, for the cell AF,
with corresponding supply and demand being 50 and 35. Accordingly, assign 35 to this
cell, delete the column and reduce the quantity available of 15. Of the remaining cost
elements (excluding the column values of 1,7 and 2), the least is 3 corresponding to the
cell BD. The quantity for this cell is 20, being lower of 20 (demand) and 40 (supply).
Delete the column headed D as well and adjust the available supply at B to 20. Now,
since only the one market remains, its requirement is met by transferring the available
supply at different sources. Accordingly, it gets the 15 units remaining at A, 20
remaining at B and 60 from C.

Table – 3 - Initial Feasible Solution – Least Cost Method

D E F Supply
To

From
A 15 35
6 4 1 50 15
B 20 20
3 8 7 40 20
C 60
4 4 2 60
Demand 95 35 150
20

The transportation schedule obtained in table given below. It involves a total cost of
Rs.555.

Table 4 – Initial Feasible Solution


D E F Supply Iteration
To
I II
From
A 15 35
6 4 1 50 15 3 

B 20 20
3 8 7 40 20  1
C 60
4 4 2 60 2 2
Demand 95 35 150
20
I 1 0 1

II -- 0 1

Total Cost: 4 x 15 + 1 x 35 + 3 x 20 + 8 x 20 + 4 x 60 = Rs.555

3. Vogel’s Approximation Method (VAM). Like the Least Cost Method, the Vogel’s
Approximation Method (VAM) also consider the shipping costs, but in a relative
sense, when making allocations. This method is given here.

First, consider each row of the cost matrix individually and find the difference between
two least cost cells in it. Then repeat the exercise for each of the columns. Identify the
column or row with the largest difference value. Now, consider the cell with the
minimum cost in that column (or row, as the case may be) and assign the maximum units
possible, looking at the demand and availability corresponding to that cell. In case of a
tie in the largest cost difference, although either of them may be chosen but it is
preferable to choose the cost difference corresponding to which the largest number of
units may be assigned or corresponding to which the cell chosen has minimum cost. To
illustrate, suppose the largest cost difference is found to be tied for a row and a column.
In applying first of the rules, determine the quantity (considering supply availability and
demand) which can be assigned in each case and select the one where larger quantity can
be assigned. In the other case, compare unit cost values of the two least cells, in the row
and the column, and choose the one which has a lower value.

Delete the column/row which has been satisfied. Again, find out the differences and
proceed in the same manner as discussed earlier. Continue until all units have been
assigned. The VAM is shown schematically in figure 2.

For example Table 1, the initial feasible solution by using this method is given in table 5.

The differences between the two least-cost cells are calculated for each row and column.
The largest of these being 4(=7-3), the row designated as B is selected. In the lower cost
cell of the row, BD, a value 20 is assigned and the column D is deleted as the demand is
satisfied. In the second iteration, again the cost differences are calculated and the first
row is selected as it shows the greatest difference value of 3. In the cell AF, 35 is
assigned and column F is deleted. Now, only the column is left and therefore no
differences need be calculated. The assignments can be easily made having reference to
the supply at various origins. The assignment made by VAM involves a total cost of
Rs.555-a solution same as that by LCM, and better than the one obtained by NW corner
rule involving a total cost of Rs.730.

Table 5 – Initial Basic Feasible Solution: VAM

D E F Supply Iteration
To
I II
From
A 15 35
6 4 1 50 15 3 

B 20 20
3 8 7 40 20  1
C 60
4 4 2 60 2 2
Demand 95 35 150
20
I 1 0 1
Start
II -- 0 1

Total Cost: 4 x For


15 +each
1 x row
35 +and
3 x column,
20 + 8 xfind
20 +
the4 x 60 = Rs.555
difference between the two least cost
cells that have not been allocated

Select the largest of the differences of


rows and columns, and, in case of a
tie, choose the one corresponding to
which largest number of units can be
assigned or the cost value is the lowest

Assign the largest quantity permissible


by the rim requirements to the cell in
that row/column with the smallest cost

Eliminate the row/column that has


been satisfied

Are all
rim
condition
s
satisfied?

STO
P

Figure – Schematic Presentation of VAM


The Vogel’s 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 that route is selected which involves the maximum penalty of not being used.

Step 2: Testing the optimality. After obtaining the initial basic feasible solution, the
next step is to test whether it is optimal or not. There are two methods of testing the
optimality of a basic feasible solution. The first of these is called the stepping-stone
method in which the optimality test is applied by calculating the opportunity cost of each
empty cell. The second method employed for testing optimality is called the modified
distribution method (MODI). This method is easier and more efficient than the stepping-
stone method. It is based on the concept of the dual variables that are used to evaluate
the empty cells. Using these dual variables the opportunity cost of each of the empty
cells is determined. The opportunity cost values in both the methods indicate the
optimality or otherwise of a given solution.
Step 3: Improving the solution. By applying either of these method, if the solution is
found to be optimal, then the problem is solved. If the solution is not optimal, then a new
and better basic feasible solution is obtained. It is done by exchanging a non-basic
variable for one basic variable. In simple terms, rearrangement is made by transferring
units from an occupied cell to an empty cell that has the largest opportunity cost, and then
shifting the units from other related cells so that all the rim requirements are satisfied.
This is achieved by first tracing a closed loop.

The solution is obtained is again tested for optimality (step 2) and revised if necessary.
We continue in this manner until an optimal solution is finally obtained.

We shall now discuss the stepping stone and the MODI methods in turn.

1. Stepping-stone method. This is a procedure of determining the potential, if


any, for improving each of the non-basic variables in terms of the objective
function. To determine this potential, each of the non-basic variables (empty
cells) is considered one-by-one. For each such cell we find out as to what
effect on the total cost would be if one unit is assigned to this cell. With this
information, then, we come to know whether the solution is optimal or not. If
not, we improve that solution. To understand it, we refer to the Table 6 which
is a reproduction of the Table 2 containing the initial basic feasible solution
obtained by NW corner rule.

In this table, there are four empty cells: BD, CD, AF and BF, with corresponding non-
basic variables as x 21 , x31 , x13 andx 23 . To start with, let us assess the potential for
improvement of the non-basic variable x 21 . A shipment of one unit of the item on this
route would mean an increase of Rs 3 but also it will mean a reduction of one unit from
x 22 and, thereby, a reduction of Rs 8 in the cost. However, to maintain feasibility, we
should subtract one unit from x11 and add one unit to x12 (notice that otherwise the
column totals are disturbed). This has the effect of decreasing he cost of Rs 6 in respect
of the former and increasing Rs 4 for the latter. The net effect of this operation would be
a reduction of Rs 7 in the cost. It is shown as follows:

Increase in cost by increasing x 21 by 1 unit = +3


Decrease in cost by decreasing x 22 by 1 unit = -8
Increase in cost by increasing x12 by 1 unit = +4
Decrease in cost by decreasing x11 by 1 unit = -6
____
Net effect on the cost = -7
____

A reduction in the cost of Rs 7 per unit can be effected by adopting the route BD, implies
that the opportunity cost of this route is +7. Since the opportunity cost here is positive, it
means that it is worth considering making variables x 21 a basic variable.

Table 6 – Initial Basic Feasible Solution : Testing for Optimality


D E F Supply
To

From
A 20 30
6 4 1 50
+
B 40
3 8 7 40
+
C 25 35
4 4 2 60
Demand 95 35 150
20

It is significant to note that the net cost effect that has been calculated in an evaluation of
the marginal (or per unit) effect on the total cost function of using a transportation route
which is not adopted hitherto. Such a change in the routes involves tracing the effects
from one utilized route, which constitutes a stepping stone, to another in such a way that
the rim requirements are satisfied. Because of the dependency relationships involved, we
start with an empty cell and then proceed through the succession of stepping stone to
reach back to the empty cell, the pattern is called the close loop. We shall digress on the
drawing of a closed loop a little later.

For the problem under investigation, we would evaluate each of the other empty cells in
the manner we did for cell BD. This is done here.

Cell Closed Loop Net Cost Change Opportunity Cost


BD -7 +7
AF AF-CF-CE-AE +1 – 2 + 4 – 4 = -1 +1
BF BF-CF-CE-BE +7 – 2 + 4 – 8 = +1 -1
CD CD-AD-AE-CE +4 – 6 + 4 – 4 = -2 +2

The rule for testing the optimality is: if none of the empty cells has a positive opportunity
cost, the solution is optimal. And, if one (or more) of the empty cells have a positive
opportunity cost, the solution is not optimal and calls for revision. For the purpose of
revising a given solution, the cells for which the opportunity cost is negative are not
considered at all because their inclusion would increase the transportation cost. If a cell
has a zero opportunity cost, it has the implication that inclusion of that particular route
would leave the objective function value unaffected. We concentrate, therefore, only on
the cells that have positive opportunity cost and would select the one with the highest
value.

In our illustration, the most favoured cellYes


is BD for it has the largest opportunity cost.
We decide, therefore, to include x 21 as a basic variable in the solution. Now, since each
unit shifted has the effect of cost-saving of Rs 7, we should transfer the maximum
number of units to the route BD. It would be equal to the least of the xij values of the
cells on the closed loop involving a minus sign. For the loop under consideration, the
cells AD and BE involve minus signs with quantities equal to 20 and 40 respectively.
Twenty being the lower of the two, we shall transfer 20 units along this path. Note that
the variable x 21 replaces the variable x11 . The resulting solution in Table 7 given
below.
Table 7 – Improved Solution: Non optimal
D E F Supply
To

From
A 50
6 4 1 50

B 20 20
3 8 7 40

C 25 35
4 4 2 60
Demand 95 35 150
20
Total Cost: 4 x 50 + 3 x 20 + 8 x 20 + 4 x 25 + 2 x 35 = Rs 590

This plan also has 5 (= 3 + 3 –1) allocations. It involves a total cost of Rs 590. We will
again apply step 2 to determine whether this solution is optimal or not, and then apply
step 3 if it is found to be non-optimal. Application of step 2 yields the following results.

Cell Closed Loop Net Cost Change Opportunity Cost

AD AD-AE-BE-BD +6 – 4 + 8 – 3 = +7 -7
AF AF-CF-CE-BE +1 – 2 + 4 – 4 = -1 +1
BF BF-CF-CE-BE +7 – 2 + 4 – 8 = +1 -1
CD CD-BD-BE-CE +4 – 3 + 8 – 4 = +5 -5

Since only the cell AF has a positive opportunity cost, we shall include it in the
transportation schedule. The maximum number of units that can be routed through AF is
35. Accordingly, the revised solution is given in Table 8.

Table 8 – Improved Solution: optimal

D E F Supply
To

From
A 15 35
6 4 1 50

B 20 20
3 8 7 40

C 60
4 4 2 60
Demand 95 35 150
20
Total Cost: 4 x 15 + 1 x 35 + 3 x 20 + 8 x 20 + 4 x 60 = Rs 555
This solution also involves 5 assignments at a total cost of Rs.555. This solution would
now be tested for optimality. This is done here:
Cell Closed Loop Net Cost Change Opportunity Cost

AD AD-AE-BE-BD +6 – 4 + 8 – 3 = +7 -7
BF BF-BF-AE-AF +7 – 8 + 4 – 1 = +2 -2
CD CD-BD-BE-CE +4 – 3 + 8 – 4 = +5 -5
CF CF-CE-AE-AF +2 – 4 + 4 – 1 = +1 -1

Since the opportunity costs of all the empty cells are negative, the solution obtained is the
optimal one.

In a similar fashion, we can test the initial basic feasible solution obtained by LCM or
VAM. If we compare it with the solution contained in Table 8 we find that the two are
identical. Clearly, therefore, the solution we obtained by VAM is optimal.

Before we discuss the MODI method for testing the optimality of a transportation
solution, a few words on the tracing of a closed loop follow.

Tracing a loop. When a closed loop is to be traced, start with the empty cell which is to
be evaluated (or to be included in the solution). Then, moving clockwise, draw an arrow
from this cell to an occupied cell in the same row or column, as the case may be, after
that, move vertically (or horizontally) to another occupied cell and draw an arrow.
Follow the same procedure to other occupied cells before returning to the original empty
cell. In the process of moving from one occupied cell to another, (a) move only
horizontally or vertically, but never diagonally; and (b) step over empty or unoccupied
cells, if the need be, without changing them. Thus, a loop would always have right
angled turns with corners only on the occupied cells.

Having traced the path, place plus and minus signs alternatively in the cells on each turn
of the loop, beginning with a plus (+) sign in the empty cell. An important restriction is
that there must be exactly one cell with a plus sign and one cell with a minus sign in any
row or column in which the loop takes a turn. This restriction ensures that the rim
requirements would not be violated when units are shifted among cells.

The following points may also be noted in connection with the closed loops:

(a) An even number of at least four cells must participate in a closed loop and an
occupied cell can be considered only once and not more.
(b) If there exists a basic feasible solution with m + n –1 positive variables, then
there would be one and only one closed loop for each cell. This is irrespective
of the size of the matrix given.
(c) All cells that receive a plus or a minus sign, except the starting empty cell,
must be the occupied cells.
(d) Closed loops may or may not be square or rectangular in shape. In larger
transportation tables, the closed loops may have peculiar configurations and a
loop may cross over itself.
(e) Although, as mentioned earlier, movement on the path set by the loop is
generally clockwise, even if the progression on the path is anticlockwise, it
would not affect the result.

The Modified distribution method (MODI)


As mentioned previously, the MODI method is an efficient method of testing the optimality of a
transportation solution. It may be recalled that in the application of the stepping stone method,
each of the empty cells is evaluated for the opportunity cost by drawing a closed loop. In
situations where a large number of sources and destinations are involved, this would be a very
time consuming and intricate exercise. The MODI method avoids this kind of extensive scanning
and reduces the number of steps required in the evaluation of the empty cells. This method gives
a straightforward computational scheme whereby we can determine the opportunity cost of each
of the empty cells. The method is shown schematically in Figure given below and its operation is
discussed and illustrated here.
STAR
T

ST
Write the initial solution obtained by
NWC rule, LCM, or VAM etc.

Yes Remove degeneracy:


Is it
degenerate assign ε to required
?eee number of cells

Assign an arbitrary index value (may be 0)


to first row on the right margin

Using cost co-efficient of occupied cells,


calculate index values for all rows and
columns
For column j , v j = cij − u i
For row I, u i = cij − v j

Using u i and v j ' s calculate


opportunity cost for each empty cell
∆ij = u i + v j − cij

Yes
Are all
A Solution is
optimal

Select the cell with largest opportunity cost STOP


Consider cells with `-‘ mark
and determine the least of Trace a closed loop which
the amounts ( x ij ) held. (i) begins and ends at the cell chosen
(ii) has alternating signs in the cells on its route
StepAdd1:this`+’
amount to the cells
bearing Add to the transportation
sign and table
starting with `+’ in the cell chosen on the RHS titled u i and
a column a row in
(iii) changes
the bottom of it labeled j .
subtract from cells with `-‘ direction
v only at the occupied
sign. A revised solution is cells
Stepobtained.
2:(a) Assign any value
(iv) mayarbitrarily to aoccupied
pass over both, row orand empty variable u i orv j .
column
Generally, a value 0 (zero) is assigned to the first row i.e. u1 = 0.

(b) Consider every occupied cell in the first row individually and assign the
column value v j (when the occupied cell is in the jth column of the row)
which is such that the sum of the row and the column values is equal to the
unit cost value in the occupied cell. With the help of these values, consider
other occupied cells one by one and determine the appropriate values of u i ' s
and v j ' s , taking in each case u i + v j = cij . Thus, if u i is the row value of
the ith row and v j is the column of the jth column and cij is the unit cost of
the cell in the ith row and jth column, then the row and column values are
obtained using the following equation:

u i + v j = cij

The initial basic feasible solution to Example is reproduced in Table given below.

Table – Initial Basic Feasible Solution: NW Corner Rule

For this solution, let u1 = 0 . Using the equation given earlier, we have, for the occupied
cell (1,1)

u1 + v1 = c11 , or 0 + v1 = 6, or v1 = 6.

Similarly, u1 + v 2 = c12 or 0 + v 2 = 4 or v 2 = 4 . With v 2 = 4 , we get


u 2 = 4( u 2 + 4 = 8) and u 3 = 0. From u 3 = 0 , we get v3 = 2. This is how u i values of
0,4 and 0, and v j values of 6, 4 and 2 are determined.

It may be mentioned that this method of assigning row and column values is workable
only when solution is non-degenerate, that is to say, for a matrix of the order m x n, there
are exactly m + n-1 non-zero (occupied) cells.

Step 3 Having determined all u i and v j values, calculate for each unoccupied cell
∆ij = u1 + v j − cij . The ∆ij ' s represent the opportunity costs of various cells. After
obtaining the opportunity costs, proceed in the same way as in the stepping stone method.
If all the empty cells have negative opportunity cost, the solution is optimal and unique.
If some empty cell(s) has a zero opportunity cost but if none of the other empty cells have
positive opportunity cost, then it implies that the given solution is optimal but that it is
not unique-there exists other solution(s) that would be as good as this solution.

However, if the solution contains a positive opportunity cost for one or more of the
empty cells, the solution is not optimal. In such a case, the cell with the largest
opportunity cost value is selected, a closed loop traced and transfers of units along
the route are made in accordance with the method. Then the resulting solution is
again tested for optimality and improved if necessary. The process is repeated until
an optimal solution is obtained.

For our example, the ∆ij values are given in circles in the empty cells in the Table given
below. They are:

∆13 = 0 + 2 −1 = 1, ∆ 21 = 4 + 6 − 3 = 7,

∆23 = 4 + 2 − 7 = −1, and ∆31 = 0 + 6 − 4 = 2.

Here the cell (2,1) has the largest positive opportunity cost and therefore we select x 21
for inclusion as a basic variable. The closed loop starting with this cell has been shown
in the table. The revised solution is shown in table given below.

Table – Improved Solution: Non-optimal

This solution is tested for optimality and is found to be non-optimal. Here the cell (1,3)
has a positive opportunity cost and therefore a closed loop is traced starting with this.
The solution resulting is shown in table given below. This, when tested, is found to be
optimal, involving a total transportation cost of Rs 555.

Table – Improved Solution: Optimal


SOME SPECIAL TOPICS

A. Unbalanced Transportation Problems

The methods we have discussed for solving a transportation problem require that the
aggregate supply (∑ai ) is equal to the aggregate demand (∑b j ) . In practice,
however, situations may arise when the two are unequal. The two such possibilities are,
first, when the aggregate supply exceeds the aggregate demand (i.e. ∑a i > ∑b j ) and,
second, when aggregate supply falls short of the aggregate demand (i.e. ∑a i < ∑b j ) .
Such problems are called unbalanced transportation problems. Balancing must be done
before they can be solved.

When the aggregate supply exceeds the aggregate demand, the excess supply is assumed
to go to inventory and costs nothing for shipping. A column of slack variables is added to
the transportation tableau which represents a dummy destination with a requirement
equal to the amount of excess supply and the transportation costs equal to zero. On the
other hand, when the aggregate demand exceeds the aggregate supply in a transportation
problem, balance is restored by adding a dummy origin. The row representing it is added
with an assumed total availability equal to the difference between the total demand and
supply, and with each of the cells having a zero unit cost. In some cases, however, when
the penalty of not satisfying the demand at a particular destination(s) is given, then such
penalty value should be considered and not zero.

B. Prohibited Routes

Sometimes in a given transportation problem some route(s) may not be available. This
could be due to a variety of reasons like the unfavorable weather conditions on a
particular route, strike on a particular route etc. In such situations, there is a restriction
on the routes available for transportation. To handle a situation of this type, we assign a
very large cost represented by M to each of such routes, which are not available. Then
the problem is solved in the usual way. The effect of adding a large cost element would
be that such routes would automatically be eliminated in the final solution.

C. Unique vs Multiple Optimal Solutions

The optimal solution to a given problem may, or may not, be unique. Recall that the
solution to a transportation problem is optimal if all the ∆ij values (in terms of the MODI
method) are less than, or equal to zero. For a given solution, if all the ∆ij values are
negative, then it is unique. If, however, some cell (or cells) has ∆ij =0, then multiple
optimal solutions are indicated so that there exist transportation pattern(s) other than the
one obtained which can satisfy all the rim requirements for the same cost.
READ
To obtain an alternate optimal solution, trace a closed loop beginning with a cell
having ∆ij =0, and get the revised solution in the same way as a solution is
improved. It may be observed that this revised solution would also entail the same
total cost as before. It goes without saying that for every `zero’ value of ∆ij value
in the optimal solution tableau, a revised solution can be obtained.

Example

Given the following transportation problem:


__________________________________________________________
Market
Warehouse _____________________________________ Supply
A B C
__________________________________________________________
1 10 12 7 180
2 14 11 6 100
3 9 5 13 160
4 11 7 9 120
__________________________________________________________
Demand 240 200 220
__________________________________________________________

It is known that currently nothing can be sent from warehouse 1 to market A and from
warehouse 3 to market C. Solve the problem and determine the least cost transportation
schedule. Is the optimal solution obtained by you unique? If not, what is/are the other
optimal solution/s?

The given transportation problem is unbalanced since aggregate demand = 240 + 200 +
220 = 660 units while the aggregate supply = 180 + 100 + 160 + 120 = 560 units. Thus, a
dummy warehouse (5) is introduced with supply of 660 – 560 = 100 units, and zero
transportation cost since no penalties are provided for not satisfying the demand at each
market. Further, since routes 1-A and 3-C are given as prohibited, the cost element for
each of these is replaced by M. The information is presented in Table 9 given below.

Table 9 – Transportation Problem : Unbalanced with Prohibited Routes


__________________________________________________________
Market
Warehouse __________________________________________ Supply
A B C
________________________________________________________________
1 M 12 7 180
2 14 11 6 100
3 9 5 M 160
4 11 7 9 120
5 0 0 0 100
_____________________________________________________________
Demand 240 200 220 660
__________________________________________________________

The initial solution is contained in Table 10. It is obtained using VAM.

In the first step, cost differences are calculated and the largest one, 9, is selected and 100
units are placed in the cell 5-A. The row 5 is deleted and differences are recalculated.
Now, a tie is observed in the largest value of the differences, that is 5. If the row 1 is
selected then the appropriate cell would be 1-C, where, considering demand and supply,
180 units can be sent, while if row 2 is chosen, then in the least cost cell 2-C, 100 units
can be placed. Thus, we may preferably choose 1-C. After this, we proceed in the usual
manner-cost differences are recalculated and quantities assigned to the least cost cells of
the rows/columns selected. The solution is reproduced in Table 12 and tested for
optimality. Since all ∆ij ≤ 0, the solution is seen to be optimal. Note that ∆ij is not
calculated for the prohibited cells 1-A and 3-C. Even if ∆ij is calculated for a prohibited
route, it is bound to be extremely negative since it would involve `-M’.

The solution given in Table 11 is not unique because in cell 3-A, ∆ij = 0. To obtain an
alternative optimal solution, we draw a closed loop as shown in this table. The revised
solution is given in Table 12. It also involves a total cost of Rs.4300.

Table 10 – Initial Basic Feasible Solution by VAM


Table 11 – Initial Feasible Solution: Optimal

Table 12 – Alternate Optimal Solution


D. Degeneracy

We have already seen that a basic feasible solution of a transportation problem has m
+ n –1 basic variables, which means that the number of occupied cells in such is one
less than the number of rows plus the number of columns. It may happen sometimes
that the number of occupied cells is less than m + n – 1. Such a solution is called a
degenerate solution.

Degeneracy in a transportation problem can figure in two ways. The problem may
become degenerate in the first instance when an initial feasible solution is obtained.
Secondly, the problem may become degenerate when two or more cells are vacated
simultaneously in the process of transferring units along the closed path.

The problem, when a solution is degenerate, is that it cannot be tested for optimality.
Both, the stepping stone method and the modified distribution method (MODI) are
inoperative in such a case. The former cannot be applied because for some of the empty
cells the closed loops cannot be traced, while the latter fails because all u i and v j
values cannot be determined.

To overcome the problem, we proceed by assigning an infinitesimally small amount,


close to zero, to one (or more if the need be) empty cell and treat the cell as an occupied
cell. This amount is represented by a Greek letter ε (epsilon) and is taken to be such an
insignificant value that would not affect the total cost. Thus, it is big enough to cause the
particular route to which it is assigned to be considered as a basic variable but not large
enough to cause a change in the total cost and the other non-zero amounts. Although ε
is, theoretically, non-zero, the operations with it in the context of problem at hand are
given here:
k + ε = k; ε +ε =ε ;
k - ε = k; ε - ε = 0; and
0+ε =ε ; kxε =0

When the initial basic feasible solution is degenerate, we assign ε to an independent


empty cell. An independent cell is the one (originating) from which a closed loop cannot
be traced. An ε may be assigned to any of the independent cells but preferably to one
with the minimum per unit cost. After introducing epsilon(s) in the requisite and
appropriate cell(s), we solve the problem in the usual manner.

Example

Determine optimal solution to the problem given below. Obtain the initial solution by
VAM.

To Market
________________________________________
M1 M2 M3 M4 Supply
________________________________________
P1 6 4 9 11 40
From P2 20 6 11 3 40
Plant P3 7 1 0 14 50
P4 7 1 12 6 90
_______________________________________
Demand 90 30 50 30
_______________________________________

Since the aggregate supply is 220 units and the aggregate demand is 200 units, we shall
introduce a dummy market, M 5 , for an amount equal to 20 (the difference between the
aggregate supply and demand), with all cost elements equal to zero. The solution is
given in Table 13.

Table 13 – Initial Feasible Solution by VAM


The initial solution obtained by VAM is degenerate because it contains only seven basic
variables since there are only 7 cells occupied and not 8(= 4+5-1) required for non-
degeneracy. Here empty cells P1 M 3 , P2 M 3 , P3 M 1 , P3 M 2 , P3 M 4 , P3 M 5 , andP 4 M 3
are independent while others are not. For removing degeneracy, let us place ε in the cell
P3 M 5 and then test it for optimality. This is done in Table 14. This solution is found to
be non-optimal. The improved solution is given in Table 15.

Table 14 – Initial Feasible Solution: Non-optimal


Total cost: 6 x 30 + 1 x 10 + 3 x 20 + 0 x 20 + 0 x 50 + 7 x 60 + 1 x 30 = Rs.700.

The optimality test, MODI, suggests that the solution given in Table 15 is an optimal one.
The solution can be stated as:

x11 = 30 , x14 = 10 , x 24 = 20 , x33 = 50 , x 41 = 60 , x 42 = 30 , all other xij = 0; Total cost =


Rs.700.

Table 15 – Revised Solution: Optimal


Total cost:: 6 x 30 + 1 x 10 + 3 x 20 + 0 x 50 + 7 x 60 + 1 x 30 = Rs.700.

When the problem becomes degenerate at the solution-revision stage, epsilon (ε ) is


placed in one (or more, if necessary) of the recently vacated cells, with the minimum
cost. And then we proceed with the problem in the usual manner.

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