Transportation and

Assignment Models
 Distribution Models
 One important application of linear programming has
been in the area of the physical distribution
(transportation) of resources, from one place to
another, to meet a specific set of requirement.
 Distribution Models...
 The chapter describes two special –purpose
algorithms: the transportation model and the
assignment model.
 Both transportation and assignment problems are
members of a category of linear programming
techniques called network flow problems.
 3.1. Transportation Problems

 Transportation problem deals with the

distribution of goods from several points of
supplies (sources) to a number of points of
demands (destinations).
 Distribution Model-
Transportation Type
Cost of product consists of production cost and
distribution cost.
Cost of product = production cost + distribution
cost
Distribution Model- Transportation
Type
Distribution cost consists of mainly the transportation
cost of items from its production (manufacturing)
center to the warehouses ( DD centers).
Transportation techniques are designed to minimize
the distribution costs.
We also know the production capacity of each product
in each factory is not fixed.
The holding capacity of a warehouse or potential sales
in each marketing center is again a fixed quantity
which cannot be exceeded.
 Characteristics of transportation problem

 A limited supply of one commodity is available at certain

sources or origins.
 There is a demand for the commodity at several
destinations
 The quantities of supply at each source and the demand
at each destination are constant.
The shipping or transportation costs per unit from each
source to each destination are assumed to be constant.
 Characteristics of
transportation...
No shipments are allowed between sources or between
destinations.
All supply and demand quantities are given in whole
number or integers.
 The problem is to determine how many units shipped
from each source to each destination so that all
demands are satisfied at the minimum total shipping
costs.
Uses of transportation techniques
Reduce distribution or transportation cost
 Improve competitiveness of product
Assist proper location of warehouses
Assist proper location of new factories or plants being
planned.
Close down warehouses which are found costly and
uneconomical.
 objectives of transportation problem
 To identify the optimal shipping routes-minimum cost
route
 To identify the maximum amount that can be shipped
over the optimum route
To determine the total transportation cost or the
profit of transportation
 The Transportation Method
Steps
1. Formulate the problem and set up in the matrix
form
The formulation of the problem is similar to the linear
programming.
Here the objective function is the total transportation
cost and the constraints are the supply and demand
available at each source and destination respectively.
 The Transportation Method
2. Obtain an initial basic feasible solution
There are 3 methods to find the initial feasible solution.
 North-West Corner Method (NWCM)
 Least Cost Method (LCM)
 Vogel’s Approximation Method (VAM)
 The Transportation Method
The initial solution obtained by any of the three
methods must satisfy the following condition:
i. The solution must be feasible
i.e.: It must satisfy all the supply and demand
constraints
ii. The number of positive allocations/occupied cells must
equal to m+n-1, where m=the number of rows (or origins
or supply centers) and n= the number of columns(or
destination centers or demand centers)
 The Transportation Method
Example:
 m=3 origins and n=4 destinations ==>m+n-1=3+4 -1=6 (i.e. the
transportation model should have 6 occupied cells).
Note:
The number of occupied cells < m+n-1==> degenerate solution =
occurs when the number of constraints less than the number of
variables in the objective function
Step 3:
Test the initial solution for optimality
If the current solution is optimal, then stop. Otherwise, determine the
new improved solution.
Step 4:
Repeat step 3 until an optimal solution is reached
Linear programming formulation
of the transportation problem
 Example
 Suppose that a firm has three factories /sources of
supply/ & four warehouses /point of demand/. The
firm's production capacity at the three factories, the
demand for the four distribution centers located at
various regions & the cost of shipping each unit from
the factories to the warehouses through each route is
given as follows:
 Linear programming formulation
of the transportation problem...
Origin Factory
W1 W2 W3 W4 Capacity =i
(Supply)
Br. 3 2 7 6
F1 5000
7 5 2 3
6000
F2

2 5 4 5
F3 2500
Requirements of
the
Warehouses 6000 4000 2000 1500 13500
( Units of demand)
Linear programming formulation
of the transportation problem...
 Using all the above information
i. Express the following transportation problem as an LPP
Solution
Let xij =The amount of commodity to be transported form source
i (i =1,2,3 ) to destination j( j= 1,2,3,4).
Then the objective function of the problem (minimization of the
total transportation cost) can be formulated as:
MinZ = 3x11 +2x12 + 7x13 +6 x14
7x21 +5x22 +2x23 + 3x24
2x31+5x32 +4x33+5x34
Linear programming formulation
of the transportation problem...
 Subject to the constraints
a. Supply constraints:
x11 +x12 +x13 +x 14 =5000 F1 supply constraint
x21 + x22 + x23 +x24 =6000 F2 supply constraint
x31 +x32 +x33+x34 = 2500 F3 supply constraint
b. Demand constraints:
x11 + x21 + x31 = 6000 W1 demand constraint
x12 + x22 + x32 = 4000 W2 demand constraint
x13 + x23 +x33 = 2000 W3 demand constraint
x14 +x24 + x34 = 1500 W4 demand constraint
xij > 0 for all i& j
Linear programming formulation
of the transportation problem...
 In the above LPP, there are m x n = 3x4 =12 decision
variables & m + n = 3+4 =7 constraints. Thus, if this
problem is solved by the simplex method, then it may take
considerable computational time.
Linear programming formulation
of the transportation problem...
 The network representation of the transportation LPP is
called Net work flow
 Show the net work flow as follow?
The net work flow
The network representation of the transportation
LPP is called Net work flow
3.2. METHODS OF FINDING INITIAL
FEASIBLE SOLUTION

A. NORTH- WEST CORNER METHOD (NWCM)

 This method does not take into account the cost of
transportation on any route of transportation.
 The NWCM gets its name because the starting point for
the allocation process is the Upper Left-hand (Northwest)
corner of the transportation table. Therefore, allocate to
the Northwest corner as many units as possible.
 NORTH- WEST CORNER METHOD (NWCM)...

Northwest corner rule

The following set of principles guides the allocation:
1. Begin with the upper left hand cell (Left, upper most in the table), &
allocate as many units as possible to that cell. This will be the smaller
amount of either the row supply or the column demand. Adjust the row &
column quantities to reflect the allocation.
2. Subtract from the row supply & from the column demand the amount
allocated
3. If the column demand is now zero, move to the cell next to the right, if
the row supply is zero, move down to the cell in the next row.
If both are zero, move first to the next cell on the right then down one cell.
4. Once a cell is identified as per step (3), it becomes a northwest cell.
Allocate to it an amount as per step (1)
5. Repeat, the above steps (1) - (4) until all the remaining supply and
NORTH- WEST CORNER METHOD (NWCM)...

 Example:
 Consider the following transportation problem:

Store 1 Store 2 Store 3 Store 4 Supply

Plant 1 19 30 50 10
7

Plant 2 70 30 40 60 9
Plant 3 40 8 70 20 18

Demand 5 8 7 14 34
NORTH- WEST CORNER MET\HOD (NWCM)...

a. Develop an initial feasible solution using the NWCM

b. Compute the total cost for this solution.
NORTH- WEST CORNER MET\HOD (NWCM)...
Solution
A. Table: Initial feasible solution

To Store 1 Store 2 Store 3 Store 4 Supply

from
Plant 1 19 30 50 10
7
5 2
70 30 40 60
Plant 2 9
6 3
40 8 70 20
Plant 3 18
4 14

Demand 5 8 7 14 34
NORTH- WEST CORNER MET\HOD (NWCM)...

Check that the solution is feasible or not: ==>m + n-1;

m=3 and n=4  3+4-1= 6 cells occupied (Feasible
solution)
 The total transportation cost of the initial feasible
solution derived by the NWCM is
 5*19+2*30+6*30+3*40+4*70+14*20= 1015 =Total Cost
NORTH- WEST CORNER MET\HOD (NWCM).....

 Note:
1. Total Supply= Total demand ===> Balanced TP
2. Total Supply ≠ total demand ===> Unbalanced TP
3. Convert the unbalanced TP into a balanced TP by using dummy
destination/dummy source.
* If total Supply > Total demand, then create a fictitious or artificial
destination called dummy destination
i.e: total Supply > Total demand===> Add dummy column
* Excess demand (Supply < demand)
- Add a dummy source
- Add a dummy row
Note: the cost of “shipments” to the dummy is usually set at zero ==>
NORTH- WEST CORNER MET\HOD (NWCM)...

Example
Develop an initial feasible solution using NWCM
Table: Unbalanced transportation table
R S T Supply
A 1 2 3 100
4 1 5 110
B

80 120 60
Demand
260
NORTH- WEST CORNER MET\HOD (NWCM)...

 Solution:

R S T Supply
1 2 3
A 100
80 20
4 1 5
B 110
100 10
0 0 0
Dummy 50
50
Demand 80 120 60 260
. THE LEAST- COST METHOD (LCM) or
(LARGEST- PROFIT) METHOD

LCM is the method used a minimum cost in the

allocation. It begins a solution by sequentially
assigning to the ratios or cells with the minimum cost
as many units as possible. The first allocation be
made to the cell with the lowest cost (the highest
profit in a maximization case)
The Least- Cost Method yields not only an initial
feasible solution but also one that is close to optimal
in small problems.
. THE LEAST- COST METHOD (LCM) or
(LARGEST- PROFIT) METHOD...

Example
1.Suppose that a firm has three factories / sources of supply
/& four warehouses/point of demand/ .The firm's production
capacity at the three factories, the demand for the four
destination centers located at various regions & the cost of
shipping each unit from the factories to the warehouses
through each route is given as follows:
 . THE LEAST- COST METHOD (LCM) or
(LARGEST- PROFIT) METHOD...

Factory
W1 W2 W3 W4 Capacity
F1 3 2 7 6 5000
F2 7 5 2 3 6000
F3 2 5 4 5 2500
Demand
6000 4000 2000 1500 13500
 . THE LEAST- COST METHOD (LCM) or
(LARGEST- PROFIT) METHOD... Answer

W1 W2 W3 W4 Factory Capacity
3 2 7 6
1000 4000
F1 5000

7 5 2 3
2500 2000 1500

F2 6000

2 5 4 5
F3 2500 2500

Demand 6000 4000 2000 1500 13500

THE LEAST- COST METHOD (LCM) or
(LARGEST- PROFIT) METHOD...
 m= 3, n=4 ==> 3+4-1 =6 occupied calls (Feasible)
 Least- Cost method is better than the NWCM because
it considers cost factories
Vogel’s approximation Method (VAM)
of finding initial feasible solution

 Vogel’s approximation (penalty or regret)

method is a heuristic method and is preferred to
the other two methods described above.
 In this method each allocation is made on the
bases of the opportunity (or penalty or extra)
costs that would have been incurred if
allocation in certain cells with minimum unit
transportation costs were missed.
Vogel’s approximation Method (VAM)
of finding initial feasible solution...

 In this method allocations are made so that the

penalty cost is minimized.
 The advantage of this method is that it gives
an initial solution which is nearer to an optimal
solution or is the optimal solution itself.
 In VAM method, we look for cells having
lowest cost and next lowest cost in each row
and column.
The steps in VAM are as follows
 Step1. Calculate penalties for each row /column by
taking the difference between the smallest and next
smallest unit transportation cost in the same row/column
and note down their difference.
 This difference indicates the penalty or extra cost
which has to be paid if one fails to allocate to the cell
with the minimum unit transportation cost.
 The steps in VAM are as
follows...
 Step2. Select the row or column with the
largest penalty (with maximum differences)
and allocate as much unit as possible in the cell
having the least cost in the selected row or
column satisfying the rim condition.
 If there is a tie in the value of penalties, it can
be broken by selecting the cell where
maximum allocation can be made.
 The steps in VAM are as
follows...
 Step3. Adjust the supply and demand and cross out
the satisfied row or column and re-draw the reduced
matrix.
 If a row and column are satisfied simultaneously, only
one of them is crossed out and the remaining row or
column is assigned a zero supply or demand.
 Any row /column with zero supply or demand should
not be used in computing future penalties and hence
should be eliminated.
 The steps in VAM are as
follows...
 Step4. Repeat step 1 to 3 until the entire
available supply at various sources and demand
at various destinations are satisfied.
 VAM Calculation
 Example 1. Taking the following data, find the initial
feasible solution using VAM and calculate the total
transportation cost .
 D1 D2 D3 D4 Supply Row difference
S1 19 30 50 10 7 9 9 40 40
5 2
S2 70 30 40 60 9 10 20 20 20
7 2
S3 40 8 70 20 18 12 20 50 --
8 10
Demand 5 8 7 14 34
34
column 21 22 10 10
difference 21 -- 10 10
-- -- 10 10
-- -- 10 50
VAM Calculation...
 Number of occupied cell =m + n – 1= 3 + 4 – 1 = 6
and solution is not degenerated
 Total transportation cost = 19 X5 = 95
10 X 2 = 20
40 X 7 = 280
60 X 2 = 120
8 X 8 = 64
20 X 10 = 200
Birr 779
Evaluating Initial Feasible Solutions for
Optimality/Optimality Test

 Once an initial solution is available, the next step is to

check its optimality. An optimal solution is one in which
there is no opportunity cost. That is, there is no other set
of transportation routes (allocations) that will reduce the
total opportunity cost.
 Thus we have to evaluate each unoccupied cell (represents
unused route) in the transportation table in terms of
opportunity cost.
Evaluating Initial Feasible Solutions for
Optimality/Optimality Test...

 The purpose of the optimality test is to see if the

proposed solution just generated can be improved or
not.
 The solution to be checked for optimality must be
non-degenerate i.e the no of occupied cells must be
equal to m+n-1.
Evaluating Initial Feasible Solutions for
Optimality/Optimality Test...

 For each empty cell, the effect of changing it to an

occupied cell is examined.
 If any of these changes are favorable, the solution is
not optimal & a new solution must be designed.
 A favorable change means an increase in the value of the
objective function in maximization problems or a
decrease in minimization problems.
 Optimum solution to a TP can be obtained by following
two methods.
Evaluating Initial Feasible Solutions for
Optimality/Optimality Test...

A. Stepping stone Method

B. Modified Distribution method (MODI/UV
Method)
 A. Stepping-stone method
 The Stepping-stone method is an iterative technique for
moving from an initial feasible solution to an optimal
solution in transportation problems.
 For the stepping- stone method to be applied to a
transportation problem, one rule about the no of shipping
routes being used must be observed. The rule is
 Occupied shipping routes ( squares) = No of rows + No of
columns – 1 = Non degenerate solution.
 The steps for evaluating the optimality of initial
feasible solution using stepping stone method
1. Select an unused square (cell) to be evaluated.
2. Beginning at this cell, trace a closed loop going
clockwise draw an arrow to an occupied cell in the
same row ( or column).
3. Move vertically or horizontally (but never
diagonally) to another occupied cell “stepping –
over” unoccupied or occupied cells (if necessary)
without changing them.
Follow the same procedure to other occupied cells
until returning to the original empty cell.
 The steps for evaluating the optimality of initial
feasible solution using stepping stone method...

 4. Begin with a plus (+) sign at the unused cell, place

alternative (-) signs and plus signs on each corner
square of the closed path just traced. i.e At each turn of
the loop ( the loop may cross over itself at times), plus
and minus signs are alternately placed in the cells,
starting with a + sign in an empty cell.
 5. There must be exactly one cell with a + sign and
exactly one cell with a - sign in any row or column in
which the loop turns.
 The steps for evaluating the optimality of initial
feasible solution using stepping stone method...

 6. An even no of at least four cells must participate in

a loop and the occupied cells can be visited once and
only once.
 7. Repeat steps 1 to 4 until an improvement index has
been calculated for all unused squares (cells).
 If all indices computed are greater than or equal to
zero, an optimal solution has been reached.
 If not, it is possible to improve the current solution
and decrease total shipping costs.
 Example 1
 Now let as take the initial feasible solutions found
using LCM and test for optimality using the stepping
stone method
A B C Supply
S1 5 7 (-)9 500
(+) 500

S2 6 2 4 600
500 100

S3 (-)3 9 (+)5 800

600 200

Demand 600 500 800 1900

1900
 Example 1...
Step1. Determine improvement index for each unoccupied
cell.
Trace a ‘closed path’ that begins at the unoccupied cell, and
moves alternately in horizontal and vertical directions pivoting
only on occupied cells and terminates on the unoccupied cells.
A ‘+’ sign is assigned to the unoccupied cell, and succeeding
corner points on the path are alternately assigned a minus sign ‘–’
and ‘+’ sign.
The plus and minus sign indicates the necessary adjustments for
satisfying the row and column requirements. See the following
example.
 Example 1...
 In this example an unoccupied cells includes:
 (S1, A), (S1, B), (S2, A) (S3, B),
The index for each unoccupied cell can be determined by
tracing a closed path.
Unoccupied cell Closed path with alternate ‘+’ and ‘–’ sign
S1, A +5 – 9 + 5 – 3 = -2
S1, B +7 – 9 +4 – 2 = 0
S2, A +6 – 4 +5 – 3 = 4
S3, B +9 – 5 +4– 2 = 6
 Example 1...
 Step2. If a better solution exists, determine which cell
should be occupied (entering cell). For minimization
problems, a better solution exists if there are any negative
improvement indices. An optimal solution has been found
when all improvement indices are nonnegative (zero or
positive). Once the optimal solution has been found, the
existence of one or more improvement indices at zero
level indicates alternative optimal solutions.
 Example 1...
 NB: If more than one negative index exists
simultaneously, occupied (assign) to the cell
with largest negative number (i.e. largest
number with minus sign). Based on the above
example, cell (S1, A) has negative indices (i.e.-
2) indicating that total transportation cost can
be further reduced by 2Q (where Q is the
number of units assigned to this cell).
 Example 1...
 Step3. Determine the departing cell and the number of
units to assign the entering cell
 The departing cell is identified by the smallest cell
in a minus position on the closed path for the
entering cell.
 The entering cell is assigned the number of units
previously given the departing variable.
 Based on the above example, the cells with minus
signs are :( S1, C) & (S3, A) with a quantity of 500
unit and 600 units respectively.
 Example 1...
 The departing cell is the cell with the smallest
quantity in a negative position.
 Therefore, cell (S1, C) is the departing cell (since 500
is less than 600). Thus, the number of unit assigned to
the new entering cell (i.e.S1, A) is 500 units.
 Example 1...
 Step4. Develop the new solution, and return to step 1
 The new solution can be determined by adding 500 units to the
cell with + sign (i.e. cell S1, A and S3, C) in the closed path
and by deducting 500 from the cell with minus sign (i.e. S1, C,
and S3, A).
 Assigning the entering cell(S1,A) with 500units
 Adjust the supply side by subtract the 500 unit from cell (S1,
C) i.e. 500-500 =0
 Adjust the demand side by adding 500 unit to cell (S3,C) i.e.
200+500 =700
 Adjust the supply side by deducting 500 unit from cell (S3, A)
i.e. 600-500 =100
 Example 1...
After these adjustments the occupied cells are:
(S1, A), (S2, B), (S2, C), (S3,A), (S3, C). See the following
table.
A B C Supply
S1 (+)5 7 (-)9 500
500
S2 6 2 4 600
500 100

S3 (-)3 9 (+)5 800

100 700
Demand 600 500 800 1900
 Example 1...
 The optimum total transportation cost =
500 X5 = 2500
500 X 2 = 100
100 X 4 = 400
100 X 3 = 300
700 X5 = 3500
 Birr 7700
 Example 1...
 To prove whether this figure is an optimal
solution or not see the following.
 We stated that total transportation cost can be
reduced by 2Q where Q is the number of units
assigned to this cell. Now we identified that
Q=500 units and the total transportation cost
reduction = 500X2= birr 1000
 Therefore, the optimal total transportation cost
= 8700-1000= birr 7700
Modified Distribution Method(MODI method)

 Unlike stepping stone method, the MODI algorithm

eliminates the need to trace closed paths for each
unoccupied cell.
 The MODI method of evaluating a transportation solution
for optimality involves the use of Index numbers that are
established for the row and columns.
 These are based on the unit cost of the occupied cells.
 The index number can be used to obtain the cell evaluation
for empty cells without the use of stepping stone-paths.
 There is one index number for each column and one for each
row.
 Modified Distribution Method(MODI
method)...

 The steps to evaluate unoccupied cells using MODI

method are as follows:
 Step1. For an initial basic feasible solution with m + n -1
occupied cells, calculate Ui for rows(i= 1,2,3……m) and Vj
for columns(j=1,2,3……n).
-Start the process by assigning a value of zero for the index
number of row 1.
-then complete the calculation of Ui’s and Vj’s for other rows
and columns using the relations: cij = Ui + Vj where cij is
the transportation cost of the cell.
Modified Distribution Method(MODI
method)...

 Step2. For unoccupied cell calculate an opportunity cost

by using the relation:
dij=cij - (ui +vj) for all i and j
Modified Distribution Method(MODI
method)...

 Step3. Examine sign of each dij

- If dij > 0, then current basic feasible solution is optimal
-if dij = 0, then current basic feasible solution will
remain Unaffected but an alternative solution exist
 - If one or more dij< 0, then an improved solution can
be obtained by entering unoccupied cell (i,j) in the
basis. An unoccupied cell having the largest negative
value of dij is chosen for entering in to the solution mix
(new transportation schedule).
Modified Distribution Method(MODI
method)...

 Step4. Construct a closed path for the unoccupied cell

with largest negative opportunity cost.
 start the closed path with the selected unoccupied cell and
mark a plus sign (+) in this cell, trace a path along the
rows (or columns) to unoccupied cell, mark the corner
with minus sign (-) and continue down the column or row
to unoccupied cell and mark the corner with plus sign and
minus sign alternatively.
 Close the path back to the selected unoccupied cell.
Modified Distribution Method(MODI
method)...

 Step5. Select the smallest quantity amongst the

cells marked with minus sign on the corners of
closed path. Allocate this value to the selected
unoccupied cell and add it to other occupied
cells marked with plus signs and subtract it
from the occupied cells marked with minus
sign
Modified Distribution Method(MODI
method)...

 Step6. Obtain a new improved solution by

allocating units to the unoccupied cell
according to step 5 and calculate the new total
transportation cost.
 Step7. Test the revised solution further for
optimality. The procedure terminates when all
dij > 0 for unoccupied cell.
Modified Distribution Method(MODI
method)...

 Remark:
The path starts and ends at the selected unoccupied cell.
It consists of successive horizontal and vertical lines
whose end points must be occupied cells, except for
the end point associated with entering unoccupied
cell.
It is immaterial whether the loop (path) is traced in a
clockwise or anti-clockwise direction. However, for a
given solution only one loop can be constructed for
each unoccupied cell.
Modified Distribution Method(MODI
method)...

Any two adjacent cells of the ordered set lie either in

the same row or in the same column.
Closed loops (path) may or may not be square in
shape.
All cells that have a plus or minus sign, except the
starting unoccupied cell, must be occupied cell.
Ever loop has an even number of cells and at least four.
Modified Distribution Method(MODI
method)...

 Example1
 For better understanding turn back to the above
example with the initial feasible solution found using
LCM method. The following table is the initial
feasible solution found using LCM.
 Modified Distribution Method(MODI
method)...
A B C Supply Ui
S1 5 7 -9 500 U1=0
500

S2 6 2 4 600 U2=-5
500 100

S3 -3 9 5 800 U3=-4
600 200

Demand 600 500 800 1900

1900

Vj V1=7 V2=7 V3=9

Modified Distribution Method(MODI
method)...

 Required: Obtain an optimal solution using MODI

method
Solution
To test the initial feasible solution of LCM by using
MODI methods followed the following steps.
Step1. Calculate the index for Ui (row), Vj(column)
for occupied cell.
NB: the index of U1=0
Modified Distribution Method(MODI
method)...

 Occupied cell cij = Ui + Vj index

S1, C 9 = U1 + V3 U1=0
9 = 0 + V3 V3=9
S2, C 4 = U2 +V3
4 = U2 +9 U2=-5
S2, B 2 = U2 +V2
2 = -5 + V2 V2=7
S3, C 5 = U3+V3
5 = U3 + 9 U3=-4
S3, A 3 = U3+V1
3 = -4+V1 V1=7
Modified Distribution Method(MODI
method)......

 Step2 calculate the opportunity cost for unoccupied

cell using the relation:
dij = Cij –Ui –Vj
Unoccupied cell dij = Cij –Ui –Vj index (dij)
S1,A 5– 0– 7 -2
S1,B 7- 0– 7 0
S2,A 6 – (-5) - 7 4
S3,B 9- (-4)- 7 6
Modified Distribution Method(MODI
method)......

 Step3 examine the sign of each.

if dij > 0 ,then current basic feasible solution is
optimal
if dij = 0 , then current basic feasible solution will
remain un affected
if dij< 0, then an improved solution can be
obtained by reassignment
Modified Distribution Method(MODI
method)......

 If one or more dij values < 0, then improved solution

can be obtained by entering unoccupied cell (i,j)
having the largest negative value.
 Based on the above data, cell (S1, A) has a negative index
(dij).
 This indicates that, if we occupied cell (S1, A), there will
be birr two reduction of transportation cost per unit.
 Thus, total reduction of cost = 2Q (where Q is number of
unit assigned to this cell)
Modified Distribution Method(MODI
method)......

 Step4. Construct a closed path for the

unoccupied cell with largest negative
opportunity cost starting the closed path with
the selected unoccupied cell (i.e cell S1, A).
 At (S1,A), the closed path(loop) is:+(S1,A), -
(S1,C),+(S3,C), -(S3,A).
 Modified Distribution Method(MODI
method)......

 See the following table.

A B C Supply Ui

S1 5 7 9 (-) 500 U1=0

(+)500
S2 6 2 4 600 U2=-5
500 100
S3 3 9 5 (+) 800 U3=-4
100 (-) 700
Demand 600 500 800 1900

1900
Vj V1=7 V2=7 V3=9
Modified Distribution Method(MODI
method)......

 Step5. Select the smallest quantity amongst the cells

marked with minus sign on the corners of closed path
and allocate this value to cell (S1, A). Then, add it to
cell (S3, C) and subtract it from cell (S3, A and S1,C).
 Based on the above table, 500 and 600 are quantities
found in cell marked with minus sign. So, select 500
units and adjust the demand and supply as follows
Modified Distribution Method(MODI
method)......

 assigning the entering cell (S1, A) with

500units
 adjust the supply side by subtract the 500 unit
from cell (S1, C) i.e. 500-500 =0
 adjust the demand side by adding 500 unit to
cell (S3,C) i.e. 200+500 =700
 adjust the supply side by deducting 500 unit
from cell (S3, A) i.e. 600-500 =100
Modified Distribution Method(MODI
method)......

 The optimum total transportation cost can be calculated as

follows:
Route unit cost quantity shipped cost
S1, A 5 500 2500
S2, B 2 500 1000
S2, C 4 100 400
S3, A 3 100 300
S3, C 5 700 2100
Total cost 7700
Exercise
 Exercise
Based on the data given below:
A B C Supply Ui
S1 5 7 -9 500 U1=0
500
S2 6 2 4 600 U2=-5
500 100
S3 -3 9 5 800 U3=-4
600 200
Demand 600 500 800 1900
1900
Vj V1=7 V2=7 V3=9
Exercise....

1. find the initial feasible solution using NWCM and

VAM method
2. test the optimality of the initial feasible solution
found in a above using stepping stone methods and
MODI method
 Quiz 5%
 1. Which one of the following is the objectives of
transportation model?
A. Cost maximization
B. Profit maximization
C. Cost minimization
D. Revenue minimization
E. B & C
 Quiz 5%...
2. Find the initial feasible solution for the ff by
NWM & LCM and calculate the TC for each(1 pt
each)