CHAPTER THREE Part I.

TRANSPORTATION AND ASSIGNMENT MODEL

3.1. FORMULATING THE TRANSPORTATION MODEL

A transportation problem typically involves a set of sending locations, which
are referred to as origins, and a set of receiving locations, which are referred
to as destinations. In order to develop a model of a transportation problem, it
is necessary to have the following information:
a. Supply quantity (capacity) of each origin.
b. Demand quantity of each destination.
c. Unit transportation cost for each origin-destination route.
Assumptions
The transportation algorithm requires the assumption that:
 All goods be homogeneous, so that any origin is capable of supplying any
destination, &
 Transportation costs are a direct linear function of the quantity shipped
over any route.
Example
Harley’s Sand and Gravel Pit has contracted to provide topsoil for three residential housing
developments. Topsoil can be supplied from three different “farms” as follows:
Farm Weekly capacity (cubic yards)
A 100
B 200
C 200
Demand for the topsoil generated by the construction projects is:
Project Weekly demand (cubic yards)
1 50
2 150
3 300
The manager of the sand and gravel pit has estimated the cost per cubic yard to ship over each of
the possible routes:
Cost per cubic yard to
From Project #1 Project #2 Project #3
Farm A Birr 4 Birr 2 Birr 8
Farm B 5 1 9
Farm C 7 6 3
This constitutes the information needed to solve the problem. The next step is to arrange the
information into a transportation table. This is shown in the following table.

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 Transportation table for Harley’s sand and gravel
To:
From: Project Project Project Supply
From: #1 4 #2 2 #3 8
Farm A 100
5 1 9
Farm B 200
7 6 3
Farm C 200
Demand 50 150 300
 Note: It is possible to write this transportation problem in the form of LPM.
Nine ( 3x3) decision variables are there and the objective function is minimization.

LPM for this problem is:

Zmin: 4x11 + 2x12 +8x13 + 5x21 + x22 + 9x23 + 7x31 + 6x32 + 3x33
Subject to:

X11 + x12 + x13  100

X21 + x22 + x23  200 Capacity/ Source constraint
X31 + x32 + x33  200
X11 + x21 + x31  50
X12 + x22 + x32  150 Demand/Destination constraint
X13 + x23 + x33  300
This can be rewritten as:
Zmin: 4x11 + 2x12 +8x13 + 5x21 + x22 + 9x23 + 7x31 + 6x32 + 3x33
Subject to:
X11 + x12 + x13  100
X21 + x22 + x23  200
X31 + x32 + x33  200
X11 + x21 + x31  50
x12 + x22 + x32  150
x13 + x23 + x33  300
x11 , x12, x13 ,x21, x22 , x23 , x31, x32 , x33  0

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3.1.2. FINDING AND INITIAL FEASIBLE SOLUTION
The starting point of the transportation method is a feasible solution. For an assignment to be
feasible, two conditions must be fulfilled:
 A feasible solution is one in which assignments are made in such a way that all
supply and demand requirements are satisfied.
 The number of nonzero (occupied) cells should equal one less than the sum of the
number of rows and the number of columns in a transportation table. In the case of
a table with 3 rows and 3 columns, the number of occupied cells should be 3 + 3 -1
= 5 in order to be able to use the transportation algorithm. Sometimes, fewer
occupied or completed cells appear in a solution. When that happens, the solution
is referred to as a degenerated solution; such a solution requires modification in
order to be able to determine if it is optimal. This topic will be covered later on.
A number of different approaches can be used to find an initial feasible solution. Three of these
are described here:
The northwest-corner method.
An intuitive approach/Least cost method
3.1.2.1. The Northwest-Corner Method
The northwest corner method is a systematic approach for developing an initial feasible solution.
Its chief advantages are that it is simple to use and easy to understand. Its chief drawback is that
it does not take transportation costs into account. Consequently, such a solution may require
much additional effort to obtain the optimal solution.
The northwest corner method gets its name because the starting point for the allocation process is
the upper left-hand (Northwest) corner of the transportation table. For the Harley problem, this
would be the cell that represents the route from Farm A to Project #1. The following set of
principles guides the allocation:
i. Begin with the upper left-hand cell, and allocate as many units as possible to that
cell. This will be the smaller of the row supply and the column demand. Adjust
the row and column quantities to reflect the allocation.
ii. Remain in a row or column until its supply or demand is completely exhausted or
satisfied, allocating the maximum number of units to each cell in turn, until all
supply has been allocated (and all demand has been satisfied because we assume
total supply and demand are equal).

Initial Feasible Solution for Harley using Northwest-corner method

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 To:
Project Project #2 Project #3 Supply
From: #1
4 2 8
Farm A 100
50(first) 50(second)
5 1 9
Farm B 200
100(third) 100(fourth)
7 6 3
Farm C 200
200(last)

Demand 50 150 300 500

The total cost is found by multiplying the quantities in “completed” (i.e. nonempty) cells by the
cell’s unit cost and, then, summing those amounts. Thus:
Total cost = 50(4) + 50(2) + 100(1) + 100(9) + 200(3) = $1900
As noted earlier, the main drawback of the northwest-corner method is that it does not consider
cell (route) costs in making the allocation. Consequently, if this allocation is optimal, that can
be attributed to chance rather than the method used.
3.1.2.2. The Intuitive Approach
This approach, also known as the minimum-cost method, uses lowest cell cost as the basis for
selecting routes. The procedure is as follows:
i. Identify the cell that has the lowest unit cost. If there is a tie, select one arbitrarily.
Allocate a quantity to this cell that is equal to the lower of the available supply for the
row and the demand for the column.
ii. Cross out the cells in the row or column that has been exhausted (or both, if both have
been exhausted), and adjust the remaining row or column total accordingly.
iii. Identify the cell with the lowest cost from the remaining cells. Allocate a quantity to
this cell that is equal to the lower of the available supply of the row and the demand
for the column.
iv. Repeat steps (ii) and (iii) until all supply and demand have been exhausted.

The initial feasible solution for the Harley problem completed using the above steps is shown
below.

Initial Feasible Solution for the Harley problem using the Intuitive approach

To:
Project Project Project Supply
From: #1 #2 #3
4 2 8

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 Farm A 50 50 100

5 1 9
Farm B 150 50 200

7 6 3
Farm C 200 200

Demand 50 150 300 500

We can easily verify that this is a feasible solution by checking to see that the row and column
totals of the assigned cell quantities equal the supply and demand totals for the rows and
columns. Now let us compute the total cost of this solution and compare it to that of the
northwest corner solution.
Total cost = 50(4) + 50(8) + 150(1) + 50(9) + 200(3) = $1800
Compared to the plan generated using the Northwest-corner method, this one has a total cost that
is $100 less. This is due to the fact that the previous one did not involve the use of cost
information in allocating units.

3.1.3. Evaluating a Solution for Optimality

The test for optimality for a feasible solution involves a cost evaluation of empty cells (i.e.,
routes to which no units have been allocated) to see if an improved solution is possible. We shall
consider two methods for cell evaluation:
The Stepping-stone method
The MODI method
3.1.3.1. The Stepping-stone method
The Stepping-stone method involves tracing a series of closed paths in the transportation table,
using one such path for each empty cell. The path represents a shift of one unit into an empty
cell, and it enables the manager or analyst to answer a “what-if” question: What impact on total
cost would there be if one unit were shifted into an unused route? The result is a cost change per
unit shifted into a cell. If the shift would result in a cost savings, the stepping-stone path also
can be used to determine the maximum number of units that can be shifted into the empty cell,
as well as modifications to other completed cells needed to compensate for the shift into the
previously unused cell.
Reconsider the initial feasible solution we found using the northwest-corner method. Only the
unoccupied cells need to be evaluated because the question at this point is not how many units to
allocate to a particular route but only if converting a cell from zero units to nonzero (a positive
integer) would decrease or increase total costs. The unoccupied cells are A-3, B-1, C-1, and C-2.
They must be evaluated one at a time, but in no particular order.
Rules for tracing Stepping-stone paths:
i. All unoccupied cells must be evaluated. Evaluate cells one at a time.

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 ii. Except for the cell being evaluated, only add or subtract in occupied cells. (It is
permissible to skip over unoccupied cells to find an occupied cell from which the path can
continue.)
iii. A path will consist of only horizontal and vertical moves, starting and ending with
the empty cell that is being evaluated.
iv. Alter + and – signs, beginning with a + sign in the cell being evaluated.
 Note that it is not necessary to actually alter the quantities in the various cells to reflect the
one-unit change, the + and – signs suffice.

The general implication of the plus and minus signs is that cells with + signs mean one unit
would be added, cells with a – sign indicate one unit would be subtracted. The net impact of such
a one-unit shift can be determined by adding the cell costs with signs attached and noting the
resulting value. Thus, for cell B-1, we have a net change of +2 (i.e., 5+2-4-1) which means that
for each unit shifted into cell B-1, the total cost would increase by $2.

Computed in similar way, the evaluations of cells C-1, A-3, and C-2 result in +10, -2, and +11
respectively. The negative value for cell A-3 indicates an improved solution is possible: For each
unit we can shift into that cell, the total cost will decrease by $2. The following table shows how
empty cell C-1 can be evaluated using the Stepping Stone Method.
Evaluation path for cell C-1
To:
Project Project Project Supply
From: #1 #2 #3
4 2 8
Farm A 50 50 100
–- +
5 1 9
Farm B 100 100 200
– +
7 6 3
Farm C + – 200 200

Demand 50 150 300 500

3.1.3.2. The MODI method (Occupied Cell Evaluation) then Unoccupied Cell
The MODI (Modified Distribution) method of evaluating a transportation solution for optimality
involves the use of index numbers that are established for the rows and columns. These are based
on the unit costs of the occupied cells. The index numbers can be used to obtain the cell
evaluations for empty cells without the use of stepping-stone paths. There is one index number
for each column and one for each row. These can be conveniently displayed along the left and
upper edges of a matrix. The index numbers are determined in such a way that for any occupied
cell the sum of the row index and the column index equals the cell’s unit transportation cost:

Row index + Column index = Cell cost

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i + kjof MM
department = cij
The index numbers are determined sequentially in a manner dictated by the position of occupied
cells. The process always begins by assigning a value of zero as the index number of row 1.
The method will be illustrated by developing index numbers for the initial feasible solution for
the Harley problem generated by the northwest-corner method. We begin assigning a value of
zero for row 1. Once a row index has been established, it will enable us to compute column index
numbers for all occupied cells in that row. Similarly, once a column index number has been
determined, index numbers for all rows corresponding to occupied cells in that column can be
determined. The complete set of row and column index numbers is shown in the following table.
Cell evaluations for Northwest Corner solution for the Harley Problem using the MODI method
k1 k2 k3
+4 +2 +10
To:
Project Project Project Supply
From: #1 #2 #3
4 2 8
r1 0 Farm A 100
50 50 -
2

5 1 9
r2 -1 Farm B 100 100 200

+ 7 6 3
r3 -7 Farm C 2
200 200

+10 +11

Demand 50 150 300 500

The cell evaluations (improvement potentials) for each of the unoccupied cells are determined
using the relationship:
Cell evaluation = Cell cost – Row index – Column index
eij = cij – ri – kj

For example, the cell evaluations for A-3 is 8 – 0 – 10 = -2. Similarly, the evaluation for B-1 is
+2, for C-1, +10, and for C-2, it is +11. Note that they agree with the values we computed earlier
using the stepping-stone method.
When cell evaluations are positive or zero, an optimal solution has been found. If one or more
is negative, the cell with the largest negative should be brought into solution because that route
has the largest potential for improvement per unit. In this case, we found that cell A-3 had an
evaluation of –2, which represented an improvement potential of $2 per unit. Hence, an
improved solution is possible.

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3.1.3.3. DEVELOPING AN IMPROVED SOLUTION
Developing an improved solution to a transportation problem requires focusing on the
unoccupied cell that has the largest negative cell evaluation. Improving the solution involves
reallocating quantities in the transportation table . More specifically, we want to take
advantage of the improvement potential of cell A-3 by transferring as many units as possible into
that cell. The stepping-stone path for that cell is necessary for determining how many units can
be reallocated while retaining the balance of supply and demand for the table. The stepping-stone
path also reveals which cells must have quantity changes and both the magnitude and direction
of changes. The + signs in the path indicate units to be added, the – signs indicate units to be
subtracted. The limit on subtraction is the smallest quantity in a negative position along the cell
path. With each iteration (new solution), it is necessary to evaluate the empty cells to see if
further improvement is possible. This requires use of either the MODI or the Stepping-stone
method. Both will yield the same values.
After reallocating the units using the stepping stone method, the empty cells will be A-2, B-1, C-
1 and C-2. Suppose we use the MODI method for evaluation. After assigning all the row and
column indices, we find the cell evaluations to be as follows:

Occupied cell Cij-Ui-Vj= Eij

Cell A-2: 2 – 0 – 0 = +2
Cell B-1: 5–1–4= 0
Cell C-1: 7-(-5)- 4 = +8
Cell C-2: 6-(-5)- 0 = +11
Because none of these numbers is negative, this is an optimal solution. You may recall that
this was the same solution obtained using the intuitive method for the initial feasible solution. At
that point, it was determined that the total cost for the distribution plan was $1800.
Optimal Solution for the Harley problem

Vj (Column indexes)

+4 0 +8

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 To:
Project Project Project Supply
From: #1 #2 #3
4 2 8
+
0 Farm A 50 2 50 100

5 1 9
0
Ui +1 Farm B 150 50 200
(Row
indexes) +
8
7 +11
6 3
-5 Farm C 200 200

Demand 50 150 300 500

Unequal Supply and Demand

Up to this point, examples have involved cases in which supply and demand were equal. As you
might guess, there are situations in which the two are not equal. When such a situation is
encountered, it is necessary to modify the original problem so that supply and demand are
equal. This is accomplished by adding either a dummy column or a dummy row; a dummy
row is added if supply is less than demand and a dummy column is added if demand is less than
supply. The dummy is assigned unit costs of zero for each cell, and it is given a supply (if a row)
or a demand (if a column) equal to the difference between supply and demand. Quantities in
dummy routes in the optimal solution are not shipped. Rather, they serve to indicate which
supplier will hold the excess supply, and how much, or which destination will not receive its
total demand, and how much it will be short.
Let’s consider an example. Suppose that Farm C in the Harley problem has experienced an
equipment breakdown, and it will be able to supply only 120 cubic yards of topsoil for a period
of time. Therefore, total supply will be 80 units less than total demand. This will require adding
a dummy origin with a supply of 80 units. The final solution is shown in the following table.
We interpret the solution indicating that Project #3 will be short by 80 units per week until the
equipment is repaired. Note, though, that this analysis has considered only transportation costs,
and that other factors, such are shortage costs or schedules of the projects, may dictate some
other course of action.

If the intuitive approach (Least Cost Method) is used to obtain the initial feasible solution when a
dummy is involved, make assignments to the dummy last. Hence, begin by assigning units to
the cell with the lowest nonzero cost, then the next lowest nonzero cost, and so on. For the
Harley problem this would mean that units would be assigned first to cell B-2 because its cost of
$1 is the lowest nonzero cell cost.
Solution using the Dummy Origin

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 To:
Project Project Project Suppl
From: #1 #2 #3 y
4 2 8
Farm A 50 50 100

5 1 9
Farm B 150 50 200

7 6 3
Farm C 120 120

0 0 0
Dummy 80 80

Demand 50 150 300 500

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