Allocating Resources to Strategic Alternatives

Operations managers often prefer to use mathematical model , as it is quicker, inexpensive and more reliable

Transportation Problem
The Transportation Problem is one of the sub-classes of LPPs in which the objective is to transport various quantities of a single homogeneous commodity, that are initially stored at various origins, to different destinations in such a way that the total transportation cost is minimum.

The Transportation problem in LPP

The transportation problem is a special case of linear programming problem This method is applicable in situations involving the physical movement of goods from plants to warehouses , warehouses to wholesalers, wholesalers to retailers , retailers to customers A transportation problem can be either balanced or unbalanced

Transportation Problem
How much should be shipped from several sources to several destinations Sources: Factories, warehouses, etc. Destinations: Warehouses, stores, etc. Transportation models Find lowest cost shipping arrangement Used primarily for existing distribution systems

A Transportation Model Requires

The origin points, and the capacity or supply per period at each The destination points and the demand per period at each The cost of shipping one unit from each origin to each destination

Consider a commodity which is produced at various centers called SOURCES and is demanded at various other DESTINATIONS.

The production capacity of each source (availability) and the requirement of each destination are known and fixed.

The cost of transporting one unit of the commodity from each source to each destination is also known.

The commodity is to be transported from various sources to different destinations in such a way that the requirement of each destination is satisfied and at the same time the total cost of transportation in minimized.

This optimum allocation of the commodity from various sources to different destinations is called TRANSPORTATION PROBLEM.

A transportation problem mathematically as follows:

can

be

stated

Let there be m SOURCES and n DESTINATIONS Let ai : the availability at the ith source bj : the requirement of the jth destination. Cij : the cost of transporting one unit of commodity from the ith source to the jth destination xij : the quantity of the commodity transported from ith source to the jth destination (i=1, 2, m; j=1,2, ..n)

Transportation Table
Source

..

Supply

1 2 : m
Demand

a1
Quantity demanded or required

a2
:

am
b1 b2 bn

Transportation Table
Destination Source

1 2 : m
Demand

x 11 x 21
: :

x 12

.. ..

Supply

x 1n

a1 a2
:

.. x 22Quantity supplied xfrom 2n

sources to destinations : : : : : :

x m1 b1

x m2
b2

..

x mn
bn

am

Transportation Table
Source 1

Cost of supplying Destination 1 unit from sources to 2 destinations .. n

Supply

1
2

x 11 c 11 x 12 c 12 . . x 21 c 21 x 22 c 22 . .
: : : : : :

x 1n c 1n x 2n c 2n
: :

a1 a2
:

:
m
Demand

x m1 c m1 x m2 c m2 . . b1 b2
..

x mn c mn
bn

am

Transportation Table
From Chennai (D) Delhi (E)
Pune (F)

To Bangalore (A)
5

Mangalore Mysore (B) (C)

4 3

Factory Capacity 100 300

300
700

Warehouse Requirements

300

200

200

Unbalanced transportation problem When the total availability is equal to the total requirement the problem (i.e. ai = bj) is said to be a balanced transportation problem. If the total availability at different sources is not equal to the total requirement at different destinations, (i.e. ai bj), the problem is said to be an unbalanced transportation problem.
Steps to convert an unbalanced problem to a balanced one are

If ai > bj i.e. the total availability is greater than the total requirement, a dummy destination is introduced in the transportation problem with requirement = ai - bj. The unit cost of transportation from each source to this destination is assumed to be zero.

If ai < bj i.e. the total availability is less than the total requirement, a dummy source is introduced in the transportation problem with requirement = bj - ai. The unit cost of transportation from each destination to this source is assumed to be zero.
After making the necessary modifications in the given problem to convert it to a balanced problem, it can be solved using any of the methods.

1. Source S1 S2 S3 D1 5 4 8 D2 3 5 4

Destination D3 8 7 4 D4 6 6 6 D5 Availability 6 1100 7 900 6 700

Requirement 800 400 500 400 600

2. Source S1 S2 S3

Destination D1 D2 D3 D4 D5 Availability 6 5 3 4 6 4 4 7 6 7 4 3 5 8 4 100 125 175

Requirement 60 80 85 90 70

Determination of the starting Solution In any transportation model we determine a starting BFS and then iteratively move towards the optimal solution which has the least shipping cost.

A solution where the row total of allocations is equal to the availabilities and the column total is equal to the requirements is called a Feasible Solution.
The solution with m+n-1 allocations is called a Basic Solution.

Different methods of obtaining initial basic feasible solution to a balanced minimization transportation problem are LEAST COST METHOD or Matrix Minima Method ( Best Method)
NORTH WEST CORNER RULE

VOGELS APPROXIMATION METHOD ( Penalty method or VAMS Method.

LEAST COST Method of determining the starting BFS.

In this method we start assigning as much as possible to the cell with the least unit transportation cost (ties are broken arbitrarily) and the associated amounts of supply and demand are adjusted by subtracting the allocated amount. Cross out the row (column) with zero supply (zero demand) to indicate that no further assignments can be made to that row(column).

If both a row and a column are simultaneously satisfied then

if exactly one row or column is left uncrossed make the obvious allocations and stop. Else cross out one only (either the row or the column) and leave a zero supply(demand) in the uncrossed out row(column). Next look for the uncrossed out cell with the smallest unit cost and repeat the process until no further allocations are to be made.

Consider the transportation table:

Destination

2 7 6

3 4

Supply 542 2 3

1
Source 2 3 Demand

1
2 4

0
3

2
2

2
4 3 8 5

3
3 1 3 0 2 2

Total shipping cost = 36

1
A E 1 B 2 C 3 D 4
Supply

F
G
Demand

4
0 4

3
2 6

2
2 8

0
1 6

8
10

2
D A 11 E 13 F 17 G 14
Available

250

B
C

16
21

18
24

14
13

10
10

300
400

Demand 200 225 275 250

NORTH-WEST Corner Method for determining a starting BFS

The method starts at the north-west corner cell (i.e. cell (1,1)). Step 1. We allocate as much as possible to the selected cell and adjust the associated amounts of supply and demand by subtracting the allocated amount.

Step 2. Cross out the row (column) with zero supply (zero demand) to indicate that no further assignments can be made to that row(column).

If both a row and a column are simultaneously satisfied then

if exactly one row or column is left uncrossed make the obvious allocations and stop. Else cross out one only (either the row or the column) and leave a zero supply(demand) in the uncrossed out row(column). Step 3. If no further allocation is to be made, stop. Else move to the cell to the right (if a column has just been crossed out) or to the cell below if a row has just been crossed out. Go to Step 1.

Consider the transportation table:

Destination

2 7 6

3 4 2

Supply 52 21

1
Source 2 3 Demand

3
2 4

2 1
3

1 1

2
2

3 2

3 1

2 1

Total shipping cost = 48

1. Source S1 S2 S3 D1 5 4 8 D2 3 5 4

Destination D3 8 7 4 D4 6 6 6 D5 Availability 6 1100 7 900 6 700

Requirement 800 400 500 400 600

2. Source S1 S2 S3

Destination D1 D2 D3 D4 D5 Availability 6 5 3 4 6 4 4 7 6 7 4 3 5 8 4 100 125 175

Requirement 60 80 85 90 70

1
A E 1 B 2 C 3 D 4
Supply

F
G
Demand

4
0 4

3
2 6

2
2 8

0
1 6

8
10

2
D A 11 E 13 F 17 G 14
Available

250

B
C

16
21

18
24

14
13

10
10

300
400

Demand 200 225 275 250

3. Vogels approximation method (VAM)

Step 1. For each row (column) remaining under consideration, determine a penalty by subtracting the smallest unit cost in the row (column) from the next smallest unit cost in the same row(column). ( If two unit costs tie for being the smallest unit cost, then the penalty is 0).
Step2. 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 the selected row or column.(Again break the ties arbitrarily.) Adjust the supply and demand and cross out the satisfied row or column.

If both a row and a column are simultaneously satisfied then

if exactly one row or column is left uncrossed make the obvious allocations and stop. Else cross out one only (either the row or the column) and leave a zero supply(demand) in the uncrossed out row(column). (But omit that row or column for calculating future penalties). Step 3. If all allocations are made, stop. Else go to step 1.

Destination 3 4

Supply

Row Penalties

3 S 2 o 2 u 4 r 3 c e Demand
Column Penalties

7 4 3

6 3

0 2

4 2 5

5 2 3

1 1 0 1 1

8 3 0 20

3
2

1 1

1 4

3 -

2 1

Total shipping cost = 32

2
D A 11 E 13 F 17 G 14
Available

250

B
C

16
21

18
24

14
13

10
10

300
400

Demand 200 225 275 250

All three Methods

Origin Destination D1 O1 O2 O3 O4 2 3 5 1 D2 7 3 4 6 9 D3 4 1 7 2 18 5 8 7 14 34 Supply

Demand 7

Moving Towards Optimality

Algorithm of MODIFIED DISTRIBUTION (MODI) METHOD

Step I: For an initial basic feasible solution with (m+n-1) occupied (basic) cells, calculate ui and vj values for rows and columns respectively using the relationship ui + vj = Cij for all allocated cells only. To start with assume any one of the ui or vj to be zero.

Step II: For the unoccupied (non-basic) cells, calculate the cell evaluations or the net evaluations as ij = (ui + vj) Cij

Step III: a) If all ij < 0, the current solution is optimal and unique. b) If any ij = 0, the current solution is optimal, but an alternate solution exists. c) If any ij > 0, then an improved solution can be obtained; by converting one of the basic cells to a non basic cells and one of the non basic cells to a basic cell. Go to step IV.

Step IV: Select the cell corresponding to most Positive cell evaluation. This cell is called the entering cell. Identify a closed path or a loop which starts and ends at the entering cell and connects some basic cells at every corner.
Step V: Put a + sign in the entering cell and mark the remaining corners of the loop alternately with and + signs.

Step VI: From the cells marked with sign, select the smallest quantity (say ). Add to each quantity of the cell marked with + sign and subtract from each quantity of the cell marked with sign. In case of a tie, make zero allocation to any one of the cells. This will make one non-basic cells as basic and vice-versa.
Step VII: Return to step I.