CH 05

Transportation Model and

Its Variance
12-1
5.1 DEFINITION OF THE
TRANSPORTATION
MODEL
DEFINITION

The transportation model is a special class of linear programs that deals

with shipping a commodity from sources (e.g., factories) to destinations (e.g.,
warehouses). The objective is to determine the shipping schedule that
minimizes the total shipping cost while satisfying supply and demand limits.
The application of the transportation model can be extended to other areas of
operation, including inventory control, employment scheduling, and personnel
assignment.
DEFINITION

The general problem is represented by the network in Figure 5.1. There are
m sources and n destinations, each represented by a node. The arcs represent
the routes linking the sources and the destinations. Arc (i, j) joining source i to
destination j carries two pieces of information: the transportation cost per unit,
cij, and the amount shipped, xij. The amount of supply at source i is ai and the
amount of demand at destinationj is bj • The objective ofthe model is to
determine the unknowns xij that will minimize the total transportation cost
while satisfying all the supply and demand restrictions.
 EXAMPLE 5.1-1
MGAuto has three plants in Los Angeles, Detroit, and New Orleans, and two major
distribution centers in Denver and Miami. The capacities of the three plants during the
next quarter are 1000, 1500, and 1200 cars. The quarterly demands at the two
distribution centers are 2300 and 1400 cars. The mileage chart between the plants and
the distribution centers is given in Table 5.l.
The trucking company in charge of transporting the cars charges 8 cents per mile
per car. The transportation costs per car on the different routes, rounded to the closest
dollar, are given in Table 5.2.
The LP model of the problem is given as
6
Table 5.1 Mileage Chart
Denver Miami
Los Angeles 1000 2690
Detroit 1250 1350
New Orleans 1275 850

Table 5.2 Transportation Cost per Car

Denver (1) Miami (2)
Los Angeles (1) 80 215
Detroit (2) 100 108
New Orleans (3) 102 68
Minimize z = 80x11 + 215x12 + l00x21 + l08x22 + l02x31 + 68x32
 These constraints are all equations because the total
supply from the three sources (= 1000 + 1500 + 1200 = 3700
cars) equals the total demand at the two destinations (= 2300 +
1400 = 3700 cars).
The LP model can be solved by the simplex method.
However, with the special structure of the constraints we can
solve the problem more conveniently using the transportation
tableau shown in Table 5.3.

9
Balancing the Transportation Model. The transportation algorithm is based on the
assumption that the model is balanced, meaning that the total demand equals the
total supply. If the model is unbalanced, we can always add a dummy source or a
dummy destination to restore balance.

Example 5.1-2
In the MG model, suppose that the Detroit plant capacity is 1300 cars
(instead of 1500).The total supply (= 3500 cars) is less than the total demand (=
3700 cars), meaning that part of the demand at Denver and Miami will not be
satisfied.
Because the demand exceeds the supply, a dummy source (plant) with a
capacity of 200 cars (= 3700 - 3500) is added to balance the transportation model.
The unit transportation costs from the dummy plant to the two destinations are zero
because the plant does not exist.
Table 5.4 gives the balanced model together with its optimum solution. The
solution shows that the dummy plant ships 200 cars to Miami, which means that
Miami will be 200 cars short of satisfying its demand of 1400 cars.
 We can make sure that a specific destination does not experience shortage by
assigning a very high unit transportation cost from the dummy source to that
destination. For example, a penalty of $1000 in the dummy-Miami cell will prevent
shortage at Miami. Of course, we cannot use this "trick" with all the destinations,
because shortage must occur somewhere in the system.
The case where the supply exceeds the demand can be demonstrated by
assuming that the demand at Denver is 1900 cars only. In this case, we need to add a
dummy distribution center to "receive" the surplus supply. Again, the unit
transportation costs to the dummy distribution center are zero, unless we require a
factory to "ship out" completely. In this case, we must assign a high unit
transportation cost from the designated factory to the dummy destination.
5.2 Nontraditional
Transportation Models
NONTRADITIONAL TRANSPORTATION
MODELS

The application of the transportation model is not limited

to transporting commodities between geographical sources
and destinations. This section presents two applications in the
areas of production-inventory control and tool sharpening
service.
EXAMPLE 5.2-1
(PRODUCTION-INVENTORY CONTROL)
Boralis manufactures backpacks for serious hikers. The demand for its
product occurs during March to June of each year. Boralis estimates the
demand for the four months to be 100, 200, 180, and 300 units, respectively.
The company uses part-time labor to manufacture the backpacks and,
accordingly, its production capacity varies monthly. It is estimated that
Boralis can produce 50, 180, 280, and 270 units in March through June.
Because the production capacity and demand for the different months do not
match, a current month's demand may be satisfied in one of three ways.

17
EXAMPLE 5.2-1
(PRODUCTION-INVENTORY CONTROL)

1. Current month's production.

2. Surplus production in an earlier month.
3. Surplus production in a later month (backordering).
In the first case, the production cost per backpack is $40. The
second case incurs an additional holding cost of $0.50 per backpack
per month. In the third case, an additional penalty cost of $2.00 per
backpack is incurred for each month delay. Boralis wishes to
determine the optimal production schedule for the four months.
18
EXAMPLE 5.2-1
(PRODUCTION-INVENTORY CONTROL)
The situation can be modeled as a transportation model by recognizing the
following parallels between the elements of the production-inventory problem
and the transportation model:
Transportation Production-inventory
1. Source i 1. Production period i
2. Destination j 2. Demand period j
3. Supply amount at source i 3. Production capacity of period i
4. Demand at destination j 4. Demand for period j
5. Unit transportation cost from 5. Unit cost (production + inventory +
source i to destination j penalty) in period i for period j 19
EXAMPLE 5.2-2
(TOOL SHARPENING)
Arkansas Pacific operates a medium-sized saw mill. The mill prepares
different types of wood that range from soft pine to hard oak according to
a weekly schedule. Depending on the type of wood being milled, the
demand for sharp blades varies from day to day according to the following
1-week (7-day) data:

Day Mon. Tue. Wed. Thu. Fri. Sat. Sun.

Demand (blades) 24 12 14 20 18 14 22

23
EXAMPLE 5.2-2
(TOOL SHARPENING)
The mill can satisfy the daily demand in the following manner
1. Buy new blades at the cost of $12 a blade.
2. Use an overnight sharpening service at the cost of $6 a blade.
3. Use a slow 2-day sharpening service at the cost of $3 a blade.
The situation can be represented as a transportation model with eight sources
and seven destinations. The destinations represent the 7 days of the week. The
sources of the model are defined as follows:

24
EXAMPLE 5.2-2
(TOOL SHARPENING)
Source 1 corresponds to buying new blades, which, in the extreme case, can provide sufficient
supply to cover the demand for all 7 days (= 24 + 12 + 14 + 20 + 18 + 14 + 22 = 124). Sources 2
to 8 correspond to the 7 days of the week. The amount of supply for each of these sources equals
the number of used blades at the end of the associated day. For example, source 2 (i.e., Monday)
will have a supply of used blades equal to the demand for Monday. The unit "transportation cost"
for the model is $12, $6, or $3, depending on whether the blade is supplied from new blades,
overnight sharpening, or 2-day sharpening. Notice that the overnight service means that used
blades sent at the end of day i will be available for use at the start of day i + 1 or day i + 2,
because the slow 2-day service will not be available until the start of day i + 3. The "disposal"
column is a dummy destination needed to balance the model. TIle complete model and its
solution are given in Table 5.13.

25
5.3 THE TRANSPORTATION
ALGORITHM

27
THE TRANSPORTATION ALGORITHM

The transportation algorithm follows the exact steps of the simplex

method (Chapter 3). However, instead of using the regular simplex
tableau, we take advantage of the special structure of the
transportation model to organize the computations in a more
convenient form.

28
THE TRANSPORTATION ALGORITHM

Step 1. Determine a starting basic feasible solution, and go to step 2.

Step 2. Use the optimality condition of the simplex method to determine
the entering variable from among all the nonbasic variables. If the
optimality condition is satisfied, stop. Otherwise, go to step 3.
Step 3. Use the feasibility condition of the simplex method to determine
the leaving variable from among all the current basic variables,
and find the new basic solution. Return to step 2.

29
THE TRANSPORTATION ALGORITHM

The special structure of the transportation problem allows securing a

nonartificiaI starting basic solution using one of three methods
1. Northwest-corner method
2. Least-cost method
3. Vogel approximation method

30
THE TRANSPORTATION ALGORITHM

The three methods differ in the "quality" of the starting basic

solution they produce, in the sense that a better starting solution yields
a smaller objective value. In general, though not always, the Vogel
method yields the best starting basic solution, and the northwest-
corner method yields the worst. The tradeoff is that the northwest-
corner method involves the least amount of computations.

31
 ITERATIVE COMPUTATIONS OF THE
TRANSPORTATION ALGORITHM
After determining the starting solution (using any of the three methods in Section
5.3.1), we use the following algorithm to determine the optimum solution:
Step 1. Use the simplex optimality condition to determine the entering variable as
the current nonbasic variable that can improve the solution. If the optimality
condition is satisfied, stop. Otherwise, go to step 2.
Step 2. Determine the leaving variable using the simplex feasibility condition.
Change the basis, and return to step 1.
The optimality and feasibility conditions do not involve the familiar row operations
used in the simplex method. Instead, the special structure of the transportation model
allows simpler computations. 40
5.4 The Assignment Model

53
THE ASSIGNMENT MODEL

"The best person for the job" is an apt description of the assignment model. The
situation can be illustrated by the assignment of workers with varying degrees of skill to
jobs. A job that happens to match a worker's skill costs less than one in which the operator
is not as skillful. The objective of the model is to determine the minimum-cost assignment
of workers to jobs. The general assignment model with n workers and n jobs is
represented in Table 5.31
The element Cij represents the cost of assigning worker i to job j (i, j = 1, 2, ... , n).
There is no loss of generality in assuming that the number of workers always equals the
number of jobs, because we can always add fictitious workers or fictitious jobs to satisfy
this assumption

54
 THE ASSIGNMENT MODEL

The assignment model is actually a special case of the transportation model in

which the workers represent the sources, and the jobs represent the destinations.
The supply (demand) amount at each source (destination) exactly equals 1. The
cost of "transporting" worker i to job j is Cij' In effect, the assignment model can be
solved directly as a regular transportation modeL Nevertheless, the fact that all the
supply and demand amounts equal 1 has led to the development of a simple solution
algorithm called the Hungarian method. Although the new solution method appears
totally unrelated to the transportation model, the algorithm is actually rooted in the
simplex method,just as the transportation model is.

55
THE HUNGARIAN METHODS

The assignment problem will be solved by the Hungarian method.

Step 1. For the original cost matrix, identify each row's minimum, and
subtract it from all the entries of the row.
Step 2. For the matrix resulting from step 1, identify each column's
minimum, and subtract it from all the entries of the column.
Step 3. Identify the optimal solution as the feasible assignment
associated with the zero elements of the matrix obtained in step 2.

57
EXAMPLE 5.4-1

Joe Klyne's three children, John, Karen, and Terri, want to earn some
money to take care of personal expenses during a school trip to the local zoo.
Mr. Klyne has chosen three chores for his children: mowing the lawn,
painting the garage door, and washing the family cars. To avoid anticipated
sibling competition, he asks them to submit (secret) bids for what they feel is
fair pay for each of the three chores. The understanding is that a three children
will abide by their father's decision as to who gets which chore. Table 5.32
summarizes the bids received. Based on this information, how should Mr.
Klyne assign the chores?