Sector Introduction:

Transport sector:
With the changing economic scenario, factors such as globalization of markets,
international economic integration, and removal of barriers to business and trade and
increased competition have enhanced the need of transportation. It is one of the most
important infrastructure requirements which is essential for the expansion of
opportunities and plays an important role in making or breaking the competitive
positioning.
ransport volumes in India remain much less than those in the developed
countries. India has still to go a long way in strengthening its transportation network. he
countries transportation network suffers from several inadequacies and, in particular it
has little resilience to deal with unforeseen demands.
ransportation, like all industries is largely influenced by information and
communication technologies with the focus being on knowledge of customer needs and
value added services. !urface transport is provided by the "oad and the Indian "ailways
#primarily for carrying low value bulk commodity, mostly for the government sector$.
%argo "oad ransport is entirely in the hands of the private sector. &n estimated '.(
million trucks #) tons capacity$ crisscross the country covering more than *+,+++
kilometers of roads. In India road transportation is preferred for cargo movement, where
flexibility of routing assumes importance. It facilitates door,to,door delivery, overcoming
unnecessary delays which normally take place in the other modes of transportation.
-early every company, business, government and consumer in the world is, to some
degree, dependent on the transportation industry. &s such, the shipping of supplies,
products and consumer goods is essential to the domestic and international economic
system. !ince '))* the transportation industry has accounted for ./ of the 0.!. 123
each year.
he transportation industry can be broken down into three ma4or groups of
companies: !hipping, passenger transport, and equipment manufacturers. In some cases,
particularly within shipping and passenger transport, companies provide services in
multiple areas of the industry. !hipping companies are responsible for the transportation
of supplies, and products to businesses, governments and individual consumers and
operate on a global basis. he passenger transport segment provides people with the
means to get anywhere on the planet, whether it is by air, sea or land. 5inally, the
manufacturing segment produces the trucks, planes, ships and railcars along with all the
technology that allow transportation to exist in its current form. hese manufacturers are
4ust as essential to the transportation of materials and people as are the companies that
transport them.
Company Profile
!mt ransport is associated with following industry #s$: rucking, 6xcept 7ocal ,
rucking, 6xcept 7ocal. &dditional products and services include: %argo 8 5reight
!ervices, rucking 9otor 5reight.
his listing is for !mt ransport:s !ingle 7ocation in 1len ;urnie, 9aryland. It primarily
operates in the <ther !upport &ctivities for ransportation %ompanies industry.
!mt ransport was founded in (+'+, and is 3rivately held.
!mt ransport had =*>,+++ in (+'' revenue #6stimated data$.
!mt ransport employs +,'+ #!how ?alue$ people #6stimated data$.
<f the +,'+ #!how ?alue$ total !mt ransport employees, +,'+ #!how
?alue$ #6stimated data$ are located here at the !ingle 7ocation
Abstract
his research work represents transportation modeling approaches and forecasting
techniques addressing the transportation flow of cargo containers with semi,processed
goods on the selected routes from a certain number of suppliers with various production
capacities to the certain points of destination. he aim is to achieve the minimum cost of
transportation flow and to forecast the future for the company@s activities. !ince the cost
minimization directly relates to the company@s profitability of which is representing
operation efficiency that can be expressed as a fraction, respective transportation
modeling methods can be solved using linear programming. he models were studied
based on a real,life data and as example of transportation flow of containers of !9
transport and services 7td, operating on "ussian market was taken. !ince the forecast
of future activities can be also related to the company@s strategic planning. he
forecasting problem was solved by one of the most common forecasting techniques used
in business life, namely the trend ad4usted forecast approach.
1 INTRODUCTION
11 Researc! "uestion and secondary researc!
his research work was conducted based on real transportation activities of a company
operating in "ussia in order to analyze its approach to the transportation flow and based
on theory, to develop the possibility of using transportation modeling technique in the
company@s activities. &lso, based on real figures and quantities, to find possible ways
of solving problems of transportation activities in order to improve the transportation
flow and to minimize the costs of shipping products from a series of sources to a series
of destinations. !9 ransport and !ervices 7td is operating in field of logistics and
transportation, especially in organizing booking processes, loading and unloading
of containers. he company itself is a part of transportation chain of ready,made goods
and raw materials from ;altic countries, 5inland and "ussia to -orth &frica countries.
he company also provides consultation services for a smaller producers and suppliers, in
order to help them to achieve the required quality standards of their goods, and the selling
in the international markets. %ost minimization has become as one of important issues in
business activities which have achieved a high priority especially today, when the
economic slowdown has hit most of the business and production sectors
%ost rationalization has become an imperative for many companies to survive.
ransportation modeling is one of those techniques that can help to find an optimum
solution and save the costs in transportation activities. Aowever, to achieve this goal by
integrating or applying any of those methods and techniques to already existing system,
the company@s management can meet other problems and obstacles, where all parts of the
transportation chain are equally important for the transportation flow processes. he
author of the thesis considers the study to be important, as the ability of minimizing
transportation costs may affect in transportation planning process and long,term strategy
for future operations and company profit potential. he main essential question of this
research work is how transportation modeling may help to improve the transportation
flow and minimize the costs of transportation. he answer to this main question involves
minimizing the cost of shipping products from a series of sources to a

'+ series of destinations: he main goal is to present three different methods of saving
costs in transportation flow, showing the possibility of cost minimization by using these
transportation modeling methods. he methods were applied to the
companyBs transportation planning activities, based on its existing quantities, by
investigating the local suppliers in "ussian territory. 5or the purpose of determining
optimum solution in this particular case, the author investigated results of different
transportation modeling methods and using hand calculations to compare differences in
the final results of each method. In the theoretical part, data collecting and presenting
along with some solved examples are presented. he author used the ransportation
9odeling methods such as -orthwest,%orner rule, the Intuitive 7owest,%ost 9ethod and
!tepping,!tone method to compute the total cost of transportation, find an initial basic
solution to the transportation problem and finally find the optimum solution. he author
investigated differences between results of transportation costs, by applying three
different methods of transportation modeling. his approach helps to see the difference in
results and therefore to develop a possibility of using transportation modeling methods in
the future company activities. !econd research question is forecasting of the company@s
activity for the next year, based on existing data and figures of present activities. In the
theoretical part of the forecast chapter, different methods introduced different types,
methods and approaches of forecasting which may help to predict the future operations of
the company and its position on the market.

he author of the thesis considers the research work is of great importance as it provides
very precise prediction and forecasts of the future values such as budget, future costs and
profit of a company.
1# $ac%&round of t!e study
he company !9 ransport and !ervices 7td is an international forwarding company
operating in field of logistics and transportation, especially in organization of booking,
loading and unloading containers for transporting of semi,processed goods. he company
itself is a part of transportation chain of raw materials and semi,processed goods from
;altic countries, 5inland, "ussia to the -orth &frica and &rabic markets. he ma4or part
of the company@s activities in "ussia corresponds to the timber industry. "ussia is one of
the biggest suppliers of the timber, raw materials and semi,processed goods out of
wood around the world. !9 ransport and services 7td cooperates directly with 5innish
company "6! imber <C 7td and represents its interest in the areas of buying and
transporting of goods in wood industry within the "ussian territory. "6! imber is a
partly owned trading company by !tora 6nso imber #>+/$ and 0nited sawmills #>+/$.
"6! imber is the market leader with a one,third share of the total market area. he
company sells -ordic and ;altic products from !tora 6nso imber, 0nited sawmills and
other minor suppliers. &ll product sales to -orth &frica and 9iddle 6ast countries are
handled by "6! imber in 5inland and !tora 6nso imber 2oo, Doper in !lovenia.
hese companies export soft wood products to market areas in 6gypt, !audi &rabia,
&lgeria, 7ebanon, unisia and 9orocco.
1' Purpose of t!e study and primary researc!

he thesis was conducted in order to introduce the transportation problem solutions by
applying different methods of the transportation flow of a company, in order to find
the points that could be improved and minimize transportation costs of the company. he
thesis was also conducted in order to show how basic figures of transportation flow
can be transferred into a transportation matrix which is the basis of any
transportation problem. 0nderstanding of transportation problem methods can help to
find an optimum solution for the transportation flow. ;ased on calculations and results of
different methods and approaches to the same transportation problem, using different
cases when demand was and wasn@t equal to supply were also investigated. he author
was also looking into the forecasting problem to show how forecasting approaches can
help to predict transportation activities of the company in the future. he thesis studied,
with the help of transportation modeling methods such as -orthwest,corner, 7owest,%ost
and ?ogel@s &pproximation , using real figures and data such as location of the sawmills
in "ussia, destinations to the terminal, terminal expenses and '( freight cost of
transportation from the terminal in "ussia to the final destination. he study investigates
possible ways of minimizing the cost of transportation by using handmade calculation.
hese two tools are helped to understand the details of the transportation algorithm by
describing all steps involved. he !ales 9anager of !9 transport and services 7td
was provided the author with all needed information about the difference of the goods
quality from different producers and all the data and figures needed for the case study.
# ()T*ODO+O,-:
TOO+S TO $) ADOPT)D:
he tool adopted is: Transportation Problems
' T*)OR-
'1 Transportation problem
hroughout last years the changing nature of logistics and supply,chain directed
companies towards global operations, has had an obvious impact on the relative
importance of the different modes of transportation. In a global context, more production
facilities are moved for greater distances because companies have developed the concept
of focus factories, with a single global manufacturing point for certain products, and the
concentration of production facilities in low,cost manufacturing locations. ransportation
problem became one of the most actual tasks for many companies. In any business
activities, locations of the new production facilities, warehouses and distribution centers
are the strategic issue with substantial cost implications where most companies usually
consider and evaluate several locations. here are a wide variety of ob4ective and
sub4ective factors that must be always considered in finding the most rational decision.
2epending on the sort of activity, for different companies and business industries the
transportation problem can be solved using different methods, approaches and
techniques. <ne of those methods is transportation modeling which is very common
approach in solving transportation problem where solution considers alternative location
within the framework of an existing distribution system.

'# T!e Transportation (odel and its .ariants
Ehe 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$. he ob4ective
of the model is to determine the shipping schedule that minimizes the total shipping cost
while satisfying supply and demand limits. he model assumes that the shipping cost is
proportional to the number of units shipped on a given route. In general, the
transportation model can be extended to other areas of operation, including, among
others, inventory control, employment scheduling, and personnel assignmentF
Ehe general problem of the transportation model can be defined and represented by the
network in 5igure '. here are m sources and n destinations, each represented by anode.
he arcs represent the routes linking the sources and destinations. &rc #i4$ 4oining source
i to destination j carries two pieces of information: the transportation cost per unit, % i4,
and the amount shipped, G i4. he amount of supply at source i is ai, and the amount of
demand at destination j is b4. he ob4ective of the model is to determine the unknown Gi4
that will minimize the total transportation cost while satisfying the supply and demand
restrictionsF
/i&ure1 Representation of t!e transportation model 0it! nodes and arcs
'' Transportation matri1
&ccording to Hay Aeizer and ;arry "ender, Eransportation modeling is an
iterative procedure for solving problems that involve minimizing the cost of shipping
products from a series of sources to a series of destinationsF. ransportation
modeling finds the least, cost means of shipping supplies from several origins to several
destinations. <rigin points of sources can be factories, warehouses, car rental agencies,
like &vis, Aertz or any other points from which goods are shipped. 2estinations are any
points that receive goods. o use the transportation model, the following information
must be considered:
'. he origin points and the capacity or supply per period at each.
(. he destination points and the demand per period at each.
.. he cost of shipping one unit from each origin to each destination.
he way of how to built and transfer data from a real case into transportation matrix
represented in the following pictures and case example of the &rizona plumbing
company which makes, among other products, a full line of bathtubs. In this case firm
must decide which of its factories should supply which of its warehouses. %ollecting data
of the transportation problem:
Table 1 Transportation Costs per bat! tube for Ari2ona Plumbin&
T!e Table 1 represents t!e set of data for Ari2ona Plumbin&3 suc! as s!ippin& costs
of one bat! tube from its factories to its 0are!ouses /or e1ample3 t!e s!ippin& cost
of one bat! tube for Ari2ona Plumbin& from its factory in Des (oines to its
Albu"uer"ue 0are!ause is 453 65 to $oston and '5 to Cle7eland

/i&ure # s!o0s t!at t!e '88 units re"uired by Ari2ona Plumbin&9s Albu"uer"ue
0are!ouse mi&!t be s!ipped in 7arious combinations from its Des (oines3
)7ans7ille3 and /ort +auderdale factories
/i&ure # Sc!eme of transportation problem
:T!e first step in t!e modelin& process is to set up a transportation matri1 Its
purpose is to summari2e all rele7ant data and to %eep trac% of al&orit!m
computations;
Table # <1
st
picture= represents !o0 transportation matri1 can be constructed3 based
on t!e information displayed in Table 1 and /i&ure# <#
nd
picture=
.
6 Transportation modelin& met!ods
;ased on theory, Eafter all needed data was arranged in tabular form, the next step of the
technique is to establish an initial feasible solution to the problemF
With the reference to the transportation problem the following terms are to be defined:

'. 5easible !olution, which is a set of non,negative allocations Gi4 I + which satisfies the
row and column restrictions.
(. ;asic 5easible !olution, which is a feasible solution to a m , origin and n ,destination
problem if the number of positive allocations are #mJnK'$. If the number of allocations in
a basic feasible solutions are less than #mJnK'$, it is called degenerate basic feasible
solution #otherwise non,degenerate$.
.. <ptimal !olution is a feasible solution #not necessarily basic$ if it minimizes the total
transportation cost. here are three different methods to obtain the initial basic solution of
a transportation problem. hese are -orthwest,%orner "ule, 7owest cost entry and
?ogel@s approximation methods.

61 T!e Nort!0est > Corner Rule
Ehe -orthwest,%orner "ule is a procedure in the transportation model where one starts
at the upper left,hand cell of a table #the northwest corner$ and systematically allocates
units to shipping routesF. ;ased on theory and using data from the previous transportation
matrix of &rizona 3lumbing the -orthwest,%orner "ule can be represented as following:
'. 6xhaust the supply #factory capacity$ of each row #e.g., 2es 9oines: '++$ before
moving down to the next row.
(. 6xhaust the #warehouse$ requirement of each column #e.g., &lbuquergue: .++$ before
moving to the next column on the right.
.. %heck to ensure that all suppliers and demands are met.
able . shows the way of how to find an initial feasible solution to the &rizona 3lumbing
problem. he problem has been solved using the following steps
'. &ssign '++ tubs from 2es 9oines to &lbuquergue #exhausting 2es 9oine@s supply$
(. &ssign (++ tubs from 6vansville to &lbuquergue #exhausting &lbuquerque@s demand$
.. &ssign '++ tubs from 6vansville to ;oston #exhausting 6vansville@s supply$
L. &ssign '++ tubs from 5ort 7auderdale to ;oston #exhausting ;oston@s demand$
>. &ssign (++ tubs from 5ort 7auderdale to %leveland #exhausting %levelan@s demand
and 5ort 7auderdale@s supply$
he last step of each method is computing the total cost of shipping assignment. he total
cost of &rizona plumbing assignment represented in the able L below:
Ehe solution given is feasible because it satisfies all demand and supply
constraints. -orthwest %orner "ule is easy to use, but this method is totally ignores the
costsF
.
T!e abo7e is Table 'Nort!0est?Corner solution to Ari2ona Plumbin& Problem
6# T!e Intuiti7e +o0est? Cost (et!od
:he Intuitive 7owest, %ost 9ethod is a cost, based approach in an initial solution to a
transportation problem. his method makes initial allocations based on lowest
costF.able > shows the way of how to find an initial feasible solution to the &rizona
3lumbing problem, using Intuitive 7owest K %ost 9ethod. his straightforward approach
uses the following steps:
'. Identify the cell with the lowest cost. ;reak any ties for the lowest cost arbitrarily.
(. &llocate as many units as possible to that cell without exceeding the supply or demand.
.. hen cross out that row or column #or both$ that is exhausted by this assignment.
L. 5ind the cell with the lowest cost from the remaining #not crossed out$ cells.
>. "epeat steps ( and . until all units have been allocated.
he total cost of 7owest K %ost 9ethod and how all the steps described above were
applied to the &rizona 3lumbing problem, represented in the able >
Table 4 Intuiti7e +o0est?Cost Solution for Ari2ona Plumbin& Problem

he total cost with the intuitive lowest,cost method is =L'++ which is less than result
of the -orthwest,%orner method of =L(++. he result of the second approach is showing
that assignment has been improved in minimizing the costs by ='++. ;ased on theory,
Ehe northwest,corner and the intuitive lowest,cost approaches are meant only to provide
us with a starting pointM we often will have to employ an additional procedure to reach an
optimal solutionF.
6' T!e .o&el9s Appro1imation (et!od
E?ogel@s &pproximation 9ethod #?&9$ is the other important technique in addition to
the northwest, corner and intuitive lowest,cost method. ?&9 is not quite as simple as the
northwest corner approach, but it facilitates a very good initial solution K as a matter of
fact, one that is often the optimal solution. ?ogel@s approximation method tackles
the problem of finding a good initial solution by taking into account the costs associated
with each route alternativeF.
he first step of ?&9, is to compute for each row and column the penalty faced if
company should ship over the second best route instead of the least,cost route.
he following tables and calculations will step by step represent all six steps involved an
initial ?&9 solution for &rizona 3lumbing.
Step 1: 5or each row and column of the transportation table, find the difference between
the two lowest unit shipping costs. hese numbers represent the difference between the
distribution cost on the best route in the row or column and the second best route in the
row or column. #his is the opportunity cost of not using the best route.$
Table @ <$elo0=Transportation table for Ari2ona Plumbin&
!tep ' has been done in able N. he numbers at the heads of the columns and to the right
of the rows represent these differences. 5or example, in row 6 the three transportation
costs are =*, =L, and =.. he two lowest costs are =L and =.M their difference is ='.
T!e abo7e Table A Transportation table 0it! .A( Ro0 and column Differences
s!o0n
Step #: he process of identification the row or column with the greatest opportunity
cost, or difference. In the able O, the row or column selected is column &, with a
difference of ..
Step ': &ssign as many units as possible to the lowest cost square in the row or columnm
selected. !tep . has been done in able *. 0nder %olumn &, the lowest,cost route is 2K &
#with a cost of =>$, and '++ units have been assigned to that square. -o more were placed
in the square because doing so would exceed 2@s availability.
Step 6: 6liminate any row or column that has 4ust been completely satisfied by the
assignment 4ust made. his can be done by placing Gs in each appropriate square. !tepL
has been done in able *, 2 row. -o future assignments will be made to the 2K; or 2K%
routes.
Step 4: "ecalculate the cost differences for the transportation table, omitting rows
or columns crossed out in the preceding step. his is also shown in able
L.N. &@s, ;@s,and %@s differences each change. 2@s row is eliminated, and 6@s and
5@s differences remain the same as in able *.
Table B.A( Assi&nment 0it! D9s Re"uirements Satisfied
Step @: "eturn to step ( and repeat the steps until an initial feasible solution has been
obtained.
T!e abo7e Table C .A( Assi&nment 0it! $9s Re"uirements Satisfied
Table 18.A( Assi&nment 0it! C9s Re"uirements Satisfied
In this case, column ; now has the greatest difference, which is equal to .. We assign (++
units to the lowest, cost square in column ; that has not been crossed out. his is seen to
be 6 K ;. !ince ;@s requirements have now been met, we place an G in the 5 K ; square
to eliminate it. 2ifferences are once again recomputed.
his process is summarized in able ).
T!e abo7e is Table 11/inal Assi&nments to $alance Column and Ro0 re"uirement
he greatest difference is now in row 6. Aence, we shall assign as many units as possible
to the lowest,cost square in row 6, that is, 6 K % with a cost of =.. he maximum
assignment of '++ units depletes the remaining availability at 6. he square 6 K & may
therefore be crossed out. his is illustrated in able '+. he final two allocations, at
5 K & and 5 K %, may be made by inspecting supply restrictions #in the rows$ and demand
requirements #in the columns$. We see that an assignment of (++units to 5 K & and '++
units to 5 K % completes the table #see able ''$ the above table.
he total cost of this ?&9 assignment is P #'++ units x =>$ J #(++ units x =L$ J
#'++units x =.$ J #(++ units x =)$ J #'++ units x =>$ P =.,)++It is worth noting that the
use of ?ogel@s approximation method on the &rizona 3lumbing %orporation data
produces the optimal solution to this problem. 6ven though ?&9 takes many more
calculations to find an initial solution than does the northwest corner rule, it almost
always produces a much better initial solution. Aence, ?&9 tends to minimize the total
number of computations needed to reach an optimal solution.
Researc! +imitations
his thesis has to take in consideration certain limitations. In transportation modeling
calculation part the author did not take into consideration the quantities of the other
smaller wood suppliers in "ussian territory, because their goods in most cases are for sale
in local market. he goods from the smaller suppliers, company uses only incase when
demand from the buyers very much exceeds the total supply from the biggest suppliers,
which happen very seldom. &nother limitation in transportation problem is that the author
did not take into consideration such situation when buyer is ready to cover in advance
half of transportation expenses such as terminal expenses and sea freight. 2epends on
terms of the contract between company and buyer the final prices of the goods may vary
and they are different from those that author used in his calculations.
CONC+USION
his was conducted in order to present different transportation modeling methods and
forecasting approaches, to analyze the possibility of improvement and integration
of transportation modeling methods into existing transportation flow of an existing
company operating in "ussian market, to minimize the costs on transportation by finding
an optimum solution for transportation routes from different production sources to a
different points of destination. he forecasting part was conducted based on real
statistical data of existing data and transportation flow activities in order to show different
forecasting approaches and to predict future situation of the company. It is considered the
study to be important, as the minimization costs and optimization of the transportation
processes may help to improve the company position on the market and increase the
profitability of the company by reduction expenses on transportation.

R)/)R)NC)S
Aamdy &. aha ,ransportation model and its variants , E<peration research *
editionF, 3rentice Aall (++N
Aamdy &.aha, Windows,based <"& software and 6xcel templates to solve
transportation problems, E<peration research *
th
editionF,3rentice Aall (++N
Aamdy &.aha, ransportation modeling, E<peration research O th editionF, 3renticeAall
(++(
Hay Aeizer, ;arry "ender, ransportation models, E<perations management seventh
editionF, 3rentice Aall (++L
Hay Aeizer, ;arry "ender, 5orecasting, E<perations management seventh
editionF, 3rentice Aall (++L
7ee H. Draevski, 7arry 3. "itzman, 9ano4 D. 9alhotra, 7inear programming
models,E<perations 9anagement processes and supply chains )
th
editionF, 3rentice Aall
(++>
Hay Aeizer, ;arry "ender, he modi and ?&9 methods of solving
transportation problems, E%2 tutorial F, 3rentice Aall (++L