ECS716/QMT710: Operational Research Pn.

Paezah

The Transportation Problems

Outline I. The Nature of the Transportation Problem II. The Balanced Transportation Problem III. The Unbalanced Transportation Problem IV. Special Cases: Degeneracy Multiple Optimal Solutions V. Maximization Problems Learning Outcomes From the study of this topic, you will learn the followings: 1. The basic nature of the transportation problem. 2. The formulation of a linear programming model for the transportation problem. 3. Formulating a transportation problem 4. Obtaining an initial solution to the transportation problem by different techniques (the Northwest Corner Rule, the Least-Cost Method, VAM) 5. Solving the transportation problem by the technique of MODI (Modified Distribution) 6. Solving the following types of transportation problems: unbalanced special cases (degenerate, multiple optimal solutions) 7. Solving maximization problems using the transportation algorithm. 8. The meaning of the following terms: Balanced transportation problem Unbalanced transportation problem Northwest corner method Vogels approximation method (VAM) Least-cost method (LCM) Modified distribution method (MODI) Stepping-stone method Closed path Cost improvement index Degenerate transportation solution Multiple optimal solutions

I.

The Nature of the Transportation Problem

Managerial decision problems for many organizations include the problem of transportation of goods and services. The transportation model, which is a special type of linear programming model, can be used to solve such problems. The model deals with the determination of a minimum cost plan for transporting a single commodity from a number of sources to a number of destinations The transportation model has the following unique characteristics. 1. A product is transported from a number of sources to a number of destinations at the minimum possible cost. 2. Each source is able to supply a fixed number of units of the product. 3. Each destination has a fixed demand for the product. Since there is only one product, a destination can receive its demand from one or more sources.

II. The Balanced Transportation Problem

When total supply and demand are equal, the formulation is called a balanced model. However, not many real-world transportation problems are balanced cases. The following is an example of a balanced transportation problem. Example 1: Trimax Sdn. Bhd. is a distributor of construction materials. The company has a contract to deliver cement to four housing projects. The cement is purchased from three different factories in town 1, town 2, and town 3. Cement bags from the factories are delivered to the project sites by trucks. Because the shipping costs are a major expense, management is initiating a study to reduce them as much as possible. For the coming week, an estimate has been made on the cement to be purchased from each factory and the quantity to be allocated to each project. This information, along with the shipping cost per truckload (in RM00) from each factory to each project is given in the following table.

Table 1: Shipping Data for Trimax Shipping Cost (RM00/truckload) Project Factory 1 2 3 Demand (truckloads) 1 6 3 13 15 2 13 9 8 25 3 5 7 11 15 4 12 6 10 10 Supply (truckloads) 20 18 27

From the above table, a total of 65 truckloads of cement are to be distributed from three sources to four destinations. The problem now is to determine the distribution plan that would minimize the total shipping cost.

The general transportation model is as shown in the following parameter table, where xij = the units of commodity shipped from source i to destination j cij = the cost of shipping 1 unit from source i to destination j Si = the total units supplied from source i. Dj = the total units demanded at destination j To
The transportation model

From 1 2 3 Demand x11

1 c11 x12 c21 x21 c31 x31 D1 x32 x22

2 c12 x13 c22 x23 c32 x33 D2

3 c13 x14 c23 x24 c33 X34 D3

4 c14 c24 C34 D4

Supply S1 S2 S3

The network representation of Trimax transportation problem is shown below.

Source
Supply Town 1: 20

Destination
Demand

15: Project 1

Network model

Town 2: 18

25: Project 2

Town 3: 27

15: Project 3

4 65

10: Project 4

65

The following is the linear programming model for the problem. Z denotes the total shipping cost, and Xij (i = 1,2,3; j = 1,2,3,4) denotes the number of truckloads of cement to be shipped from town i to project j.

Minimize Z = 6x11 + 13x12 + 5x13 + 12x14 + 3x21 + 9x22 + 7x23 + 6x24 + 13x31 + 8x32 + 11x33 + 10x34 subject to: x11 + x12 + x13 + x14 = 20 (supply from Factory 1) x21 + x22 + x23 + x24 = 18 (supply from Factory 2) LP Model (for balanced problem) x31 + x32 + x33 + x34 = 27 (supply from Factory 3) x11 + x21 + x31 = 15 (demand from Project 1) x12 + x22 + x32 = 25 (demand from Project 2) x13 + x23 + x33 = 15 (demand from Project 3) x14 + x24 + x34 = 10 (demand from Project 4) X11 , X12 , X13 , X14 , X21 , X22 X23 , X24 , X31 , X32 , X33 , X34 0

Formulating a Transportation Model Exercise1: Formulate the transportation problem for Trimax by completing the following parameter table. To From

Supply

Demand

The above transportation problem can be solved by using a special simplex algorithm called the transportation algorithm. The following is a flowchart showing the transportation algorithm.

The Transportation Algorithm

Start

Phase 1

`11 Develop an Initial Feasible Solution (Vogels Approximation Method (VAM))

Phase 2 `11 Test for Optimality (Modified Distribution (MODI) method)

optimal

Interpret

Stop

Not optimal Phase 3 `11 Generate an Improved Solution (Stepping-stone method)

In general, the procedure for solving a transportation problem involves three phases. Phase 1 to determine an initial feasible solution Phase 2 to test for optimality Phase 3 to improve the solution [Phase 3 is applied when the procedure in Phase 2 does not result in an optimal solution.]

Phase 1: Developing an Initial Feasible Solution The transportation requires that the problem is balanced, i.e. the total supply = total demand. (The unbalanced problem will be discussed later). An initial feasible solution can be obtained by using Vogels Approximation Method (VAM). Vogels Approximation Method (VAM): Step 1: Calculate a penalty for each row or column by subtracting the lowest unit cost in the row or column from the next lowest unit cost for the same row or column. Step 2: Identify the row or column with the largest penalty. Break ties arbitrarily. Allocate as much as possible to the cell with the least unit cost in this row or column. Adjust the free demand and supply totals and cross out the row or column whose demand or supply is entirely used up. If both the row and the column have no supply or demand left only cross out one. Step 3: If all columns and rows have been satisfied then we have an initial solution. Otherwise recalculate the penalties for uncrossed out rows and columns without counting rows and columns with zero free demand or supply.

Exercise 2: Solve Trimaxs problem to determine the optimal distribution plan. Use VAM for the starting solution. What is the minimum total cost? . Initial solution by VAM: To From Supply

Demand

Initial solution: From Factory To Project No. of Truckloads

Total cost =

Phase 2: Testing for Optimality Testing for optimality can be done using the Modified Distribution (MODI) method. This procedure is based on the dual of the transportation problem (recall: every LP problem has a dual. Hence, a transportation problem which is a special type of LP problem also has a dual). When the dual is solved, its solution yields two types of variables: Ri = shadow price of source i (i.e. value of one more unit at source i) Kj = shadow price of destination j (i.e. value of one more unit at destination i) The MODI procedure uses the value of Ri and Kj to find the cell improvement indices (cell evaluators). The MODI Method MODI requires that we evaluate each empty cell to determine the transportation cost of transferring 1 unit of goods from an occupied cell to an empty cell. MODI may only be applied if a transportation table has at least m+n -1 cells occupied, where m = no. of sources, and n = no. of destinations. If the number of occupied cells < m+n-1, then the problem becomes degenerate (to be discussed later)

MODI method: Step 1: Assign the following values: Ri to row i, and Kj to row j. Let Cij = unit cost for cell (i, j). Step 2: For each occupied cell (used route)-, form an equation Ri + Kj = Cij. Step 3: Let R1 = 0. Solve all the equations formed in Step 2 for each Ri and Kj. Step 4: Test for Optimality. For each empty cell, determine the improvement index Iij using the formula Iij = Cij Ri Kj. The improvement index Iij is the net cost of shipping 1 unit on a route not used in the current transportation solution. If Iij 0 for all the empty cells, then the current solution is optimal. (Note: For a maximization problem, a solution is optimal when all the empty cells have Iij 0 )

If the solution is optimal, interpret it and stop. If not optimal, proceed to Phase 3 to improve the solution.

Phase 3: Generating an Improved Solution (the Stepping-Stone Method) One way to improve the solution of a transportation problem is by applying the stepping stone method.

Stepping-Stone Method: Step 1: Choose an empty cell (unused square) with the best improvement index Iij. For a minimization problem, the best index is the MOST NEGATIVE Iij,, indicating the greatest decrease in cost. Starting from the empty cell with the best index, trace a closed path back to this cell by stepping on occupied cells, moving with only horizontal and/or vertical moves. Here are some examples of possible shapes of closed paths.

Step 2:

(The shape of a closed path obtained depends on the location of occupied cells) Step 2: Step 3: Starting from the cell with the best index, place plus (+) and minus (-) signs alternately at occupied cells on the corners of the closed path. From the cells with minus signs, select the SMALLEST QUANTITY of goods. This smallest quantity is the maximum value to be allocated into the cell with the best index. ADD the smallest quantity selected to the existing quantity in each cell with a (+) sign, and SUBTRACT this smallest quantity from the quantity in each cell with a (-) sign. Step 4: Draw a new transportation table showing the result of Step 4. This should produce a new shipment schedule with a better (lower) total transportation cost.

III. The Unbalanced Transportation Problem

A transportation problem is considered unbalanced when total supply total demand. Thus, either total supply < total demand, or total demand < total supply. To use the transportation algorithm, we must make a minor modification in the transportation table so that the problem is balanced. Total Supply < Total Demand Create an imaginary source, called a dummy source (or dummy row) with the necessary supply. Set the unit costs in the dummy row to zero, since the dummy source is only imaginary.

Total Demand < Total Supply Add a dummy destination (or dummy column) with the necessary demand to balance total supply and total demand. Set the unit costs in the dummy column to zero.

Example 2: Suppose Factory 3 can sell only 25 truckloads of cement to Trimax. Determine the optimal shipment. What is the minimum total cost? Identify the project with cement shortage..

IV. Special Cases

A. DEGENERACY Degeneracy in transportation problems occur under the following condition: number of occupied cells < m + n - 1 , where m = no. of sources, n = no. of destinations A transportation table of a degenerate problem does not have enough cells occupied to allow the formation of closed paths for all unused cells. Hence, we would not be able to determine the Ri and Kj values needed for the MODI technique, or evaluate each unused cell for improvement. Degeneracy may occur two ways: 1. At the initial solution if the supply equals demand for which an assignment is to be made. 2. At an intermediate solution if the quantities of two or more losing cells at the non-degenerate solution are the same. Consequently the cells will become empty simultaneously when the solution is improved.

How to handle degeneracy? Create artificially occupied cells by placing artificial zeroes into empty cells so that number of occupied cells = m + n -1 There are obviously many cells into which a zero could be entered. There are no rules for entering these zeros. However choosing a low cost cell is generally a good idea. Pretend as if those cells with artificial zeroes are occupied, and proceed as a normal, non-degenerate case.

Example 3a: The following table gives the unit costs (RM), supply (units) and demand (units) for a certain product.

Customer 1 1 Plant 2 3 Demand 6 3 10 150 2 10 9 8 100 3 5 7 11 200 4 12 6 10 100 Supply 200 150 200

Obtain an optimal distribution schedule.

Example 3b: Given the following transportation table, obtain an optimal solution. To From Factory A Factory B Factory C Warehouse Requirement

Warehouse 1 8 70 15 50 3 30 150

Warehouse 2 5 10 80 9

Warehouse 3 16 7

Factory capacity 70 130

10 50 80 280 50

80

B.

MULTIPLE OPTIMAL SOLUTIONS

A solution to a transportation problem can be either unique or multiple. A transportation problem may have alternate optimal solutions if the optimal table has at least one empty cell with improvement index Iij = 0. An alternate optimal solution can be found by applying the stepping stone method starting from the empty cell with zero improvement index.

Example 4: Given a transportation table with the following unit costs (RM), supply and demand, find the optimal solution. To From A B C D Demand(units) 1 10 15 13 10 1200 2 15 13 12 9 1200 3 18 16 10 12 600 Supply(units) 500 500 1000 1000

V.

MAXIMIZATION PROBLEMS

So far we have studied minimization problems. The transportation algorithm can be applied to maximization problems. However, slight modifications to the algorithm are needed to solve such problem. General Rules for Solving a Maximization Problem If a transportation table has unit profits, instead of unit costs, the initial solution can be obtained by applying a Maximum-Profit method, which is the opposite of the Least-Cost method.

Testing for optimality can be done by the MODI method. However, the best improvement index is the LARGEST positive Iij value. Improve a solution using the Stepping Stone method (same as before). An optimal solution is reached when all Iij 0, i.e. when there is NO POSITIVE Iij.

Example 5 SML Food Industries produces its latest health food product at its three factories. It has three major customers. The profit per unit (RM), estimated monthly demand and capacity of each factory are given below. Customer Factory A B C X 12 6 6 Y 10 9 10 Z 7 6 9

Factory A B C

Capacity (units) 1300 1000 1200

Customer A B C a)

Demand (units) 1100 900 1300

Use the transportation algorithm to determine the optimal allocation of the health food product to the customers from the factories in order to maximize the total profit. Calculate the maximum total profit. Is the optimal solution unique? Explain. Obtain an alternative optimal solution, if any.

b)

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Textbook problems 8.1-2, 8.1.4, 8.1-6.8.2-9 (a),(d)

Supplementary Exercises 1. Consider the following transportation problem. Manufacturer 1: PJ 1: Penang 2: Shah Alam 3: Pekan Demand (units) 13 8 10 80 Shipping Cost (RM/Unit) Warehouse 2: Ipoh 10 10 12 65 3: Kota Bahru 18 18 15 70 4: J.Bahru 15 12 18 85 75 125 100 Supply (units)

In this problem, a total of 300 units of laser jet printers are to be distributed from three sources to four destinations. Determine the optimal distribution plan. 2. Solve each of the following transportation problems. Calculate the minimum total cost. (i) From 1 2 3 Demand (units) A 22 15 28 520 Cost (RM) To B 17 35 21 250 C 30 20 16 400 D 18 25 14 380 Supply(units) 420 610 340

(ii) $10 $2 $1 7 $4 $3 $2 6 $2 $4 $0 6 8 5 6

(iii) $7 $1 5 $3 $4 $8 6 $5 $9 $6 19 4 7 19

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3. Seri Rampai Sdn Bhd is a supplier of cosmetic products. The company has three distribution centers which are located at the northern, central, and southern regions of the country. For the coming month, the company has to distribute one particular cosmetic product to four major customers. The data on the supply available at each distribution center and the customer demand are as follows: Distribution Center Northern Central Southern Customer 1 2 3 4 Supply (units) 10,000 15,000 18,000 Demand (units) 10,000 12,000 15,000 8,000

The total unit cost (RM) of producing and distributing the product from each distribution center to each customer is shown in the following table. Customer Distribution Center Northern Central Southern 1 16 12 14 2 16 15 10 3 10 9 13 4 15 8 12

The product will be sold to the customers at the price of RM25 each. a) Determine the optimal distribution schedule that will maximize Seri Rampais total profit and calculate the maximum total profit. b) Identify any customer with unfulfilled demand and state the shortage. 4. Frontline Logistics Sdn Bhd has a contract to supply cements to three construction firms in the Klang Valley. Cements are purchased from manufacturers at three different plants and transported to the three firms as orders are placed. Shipping costs per bag of cement from each plant to each firm have been estimated as follows: Cost (RM/bag) Shah Alam Plant 1 Plant 2 Plant 3 9 11 6 Cheras 14 8 6 Putrajaya 12 10 11

Each plant can supply 200 bags of cement. Frontline has received orders from the three construction firms, and they have requested the following bags of cement: Shah Alam 270, Cheras 150, and Putrajaya 150.

a) Determine the optimal shipment. What is the minimum cost? b) Suppose the firm in Putrajaya requires an additional 60 bags of cement. Determine the optimal solution. What is the minimum total cost?

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