THE MODI

(MODIFIED DISTRIBUTION)
METHOD OF TRANSPORTATION
PROBLEM
 In this method, we have to add a new row above the table
for cost factors and a new column to the left of the table.

We make use of Vi for cost factors of supply, and Wj for cost

factors of demand. The key to the use of MODI is to utilize the
occupied cells for each Vi and Wj values, and then use these values to
calculate the net contribution of the vacant cells.
 Let us consider the RSV problem. The initial table with the cost
factors’ row and column is shown below:

W1 W2 W3

A B C

V1 1 4 8 8
158 158

V2 2 16 24 16
16 168 184

V3 3 8 16 24
36 143 19

174 204 143

 The initial distribution is the same as in the stepping stone method, where
the Northwest rule is utilized. Cost factors which are V i and Wj are added.

Let Cij = the shipping cost per unit to a particular occupied cell.

Vi + Wj = Cij

So each value of Vi and Wj (from occupied cells) is computed as

follows:

V1 + W1 = 4 V2 + W2 = 24 V3 + W3 = 24
V2 + W1 = 16 V3 + W2 = 16
 We may assume a value for anyone of them, so we can solve
for the rest. Suppose V1 = 0, then we have:

0 + W1 = 4 V2 + W2 = 24 V3 + W3 = 24
W1 = 4 12 + W2 = 24 4 + W3 = 24
W2 = 12 W3 = 20

V2 + W1 = 16 V3 + W2 = 16
V2 + 4 = 16 V3 + 12 = 16
V1 = 4 V1 = 4
 Table I
(with the indicated cost factor values)

W1 = 4 W2 = 12 W3 = 20

A B C

V1 = 0 1 4 8 8
158 -4 - 12 158

V2 = 12 2 16 24 16
16 168 - 16 184

V3 = 4 3 8 16 24
36 143 19

174 204 143

 To test for improvement, evaluate the vacant cells for the net
contribution to cost, by subtracting Vi and Wj from cost of vacant
cells.
Vacant Cells:
1-B 8 – 0 – 12 = -4
1-C 8 – 0 – 20 = -12
2-C 16 – 12 – 20 = -16
3-A 8–4–4=0
 

The improvement shows that some units must be transferred to 2-C. As

in the stepping stone method, chose the least entry from used cells having
negative sign if taken as a rectangular order in the process of improvement.
The affected cells are:

2-C

24 16

168

16 24

36 143
After the transfer of 143 units to 2-C the entries become:

2-C

24 16

168 143

16 24

36
 Table II

W1 = 4 W2 = 12 W3 = 4

A B C

V1 = 0 1 4 8 8
158 -4 158

V2 = 12 2 16 24 16
16 25 143 184

V3 = 4 3 8 16 24
179 19

174 204 143

Finding the values of the cost factors by using the occupied cells:

Let V1 = 0
V1 + W1 = 4 V2 + W2 = 24 V2 + W3 = 16
0 + W1 = 4 12 + W2 = 24 12 + W3 = 16
W1 = 4 W2 =12 W3 = 4

V2 + W1 = 16 V3 + W2 = 16
V2 + 4 = 16 V3 + 12 = 16
V2 = 12 V3 = 4
Testing for Improvement (Table II)

Vacant Cells:
1-B 8 – 0 – 12 = -4
1-C 8–0–4=4
3-A 8–4–4=0
3-C 24 – 4 – 4 = 16
Improvement shows that some units may be transferred to 1-B.
Affected cells are:

1-B

24 16

158

16 24

16 25
After the transfer we have:

1-B

24 16

158 25

16 24

16
 Table III

W1 = 4 W2 = 8 W3 = 4

A B C

V1 = 0 1 4 8 8
133 25 158

V2 = 12 2 16 24 16
41 143 184

V3 =8 3 8 16 24
-4 179 19

174 204 143

Computing the cost factors through the used cells

If V1 = 0
 
V1 + W1 = 4 V2 + W1 = 16 V3 + W2 = 16
0 + W1 = 4 V2 + 4 = 16 V3 + 8 = 16
W1 = 4 V2 =12 V3 = 8

V1 + W2 = 8 V2 + W3 = 16
0 + W2 = 8 12 + W3 = 16
W2 = 8 W3 = 4
 Testing for Improvement (Table III)

Vacant cells:
1-C 8–0–4=4
1-B 24 – 12 – 8 = 4
2-A 8 – 8 – 4 = -4
3-C 24 – 8 – 4 = 12

The improvement shows that some units must be transferred to 3-A.

the rectangular position of used cells in relation to 3-A are 1-A, 1-B and 3-
B. In the process of improvement as in the stepping stone method, add to
3-A, subtract from 1-A, add to 1-B and subtract from 3-B. the alternatives
are to get from 1-A or from 3-B. the entries from 1-A and 3-B are 133 and
179, respectively. Since 133 is smaller than 179, 133 must be transferred
to 3-A.
Involved entries are:

A B
24 16
1
133 25

16 24
2
41

8 16
3
179
After the transfer we have:

A B
24 16
1
158

16 24
2
41

8 16
3
133 46
 Table IV

W1 = 0 W2 = 8 W3 = 0

A B C

V1 = 0 1 4 8 8
158 158

V2 = 16 2 16 24 16
41 143 184

V3 =8 3 8 16 24
133 46 19

174 204 143

 Test for Improvement
Cost:  
158 x 8 = 1,264 Vacant Cells:
41 x 16 = 656 1-A 4–0–0=4
143 x 16 = 2,288
133 x 8 = 1,064 1-C 8–0–0=8
46 x 16 = 736 2-B 24 – 16 – 8 = 0
Cost = P 6,008 3-C 24 – 8 – 0 = 16

Since there is no negative in the improvement, the above table is

optimum.
(Formulate the decision)
 Summary of MODI Method

A. Add the cost factors to get the cost of the occupied cells, by one
value and solving for the rest.

B. Subtract the outside cost factors from the indicated cost of the
vacant cells. The most negative result indicates the point of
destination for transfer.