5

Transportation and
Transhipment Problems
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A transportation problem is a special type of linear programming problems and typically

involves situations where goods are required to be transferred from some sources, or
plants, to some destinations, or markets, at a minimum cost. Although such problems can
be formulated and solved as linear programming problems, obtaining such solution is
very inefficient because of large computational effort involved in that. A typical
transportation problem is like this. A matrix is given where sources are given row-wise,
destinations are indicated column-wise and unit cost of transportation from each source to
each destination is provided. Also indicated is the supply at each source and demand at
every market.
Balanced and Unbalanced Problems
If aggregate demand (AD) is equal to aggregate supply (AS), the problem is called
balanced transportation problem and if the two do not match, it is called unbalanced. An
unbalanced problem is balanced first by introducing a dummy source (if AS<AD) or a
dummy destination (if AD>AS). The cost elements of the dummy row/column are taken
to be zero. If, however, penalties for not satisfying demand are given, they should be
taken instead of zeros. In any case, the solution to a problem begins only when it is a
balanced one.
Solution to Transportation Problem
Three steps are involved in obtaining solution to a transportation problem. They are:
1. Find initial solution to the problem.
2. Test whether the solution is optimal. Stop if it is optimal. If not, go to step 3.
3. Find an improved solution. Go to step 2.
1. Finding Initial Solution
There are three methods for finding initial solution to the
problem. They are given here.
(a) North-west Corner Rule: Begin from the north-west corner of the table. Consider
first plant supply and first market demand. The lower of the two shall be assigned
to the first-plant first-market route. If supply is more than demand, shift to the
next the market and if supply is less than demand then move to the next plant. In
case the supply and demand are equal, move diagonally to the next plant and next
market route. In any case, again consider the demand and supply and make the

allocation by taking lower of the two. Move in a similar manner until all
allocations are made. This gives initial feasible solution to the problem.
(b) Least Cost Method: In this method, the route with the minimum cost (that is to
say, the cell with the least unit cost) is selected and the supply and the demand at
the plant and market involved are considered. The lower of these two is allocated
in the cell chosen and the plant or market whichever is satisfied is deleted. Both
are deleted if they are both satisfied due to equal demand and supply. If the plant
is satisfied in the allocation, then the demand at the market is adjusted and if the
market is satisfied, then the plant supply is adjusted. In case there is more than
one cell with the same minimum cost, the one where larger number of units can
be allocated is selected. Again the remaining plants and markets are considered
and the same steps are taken. The process is continued until all allocations are
made.
(c) Vogels Approximation Method (VAM) or Penalty Method:
This method works
as follows.
(i)
Obtain the difference between pair of minimum cost values for each of the
rows and columns.
(ii)
Select the largest of the cost differences and choose the least-cost cell in
that row/column. Consider the supply and the demand at the plant and
market involved. The lower of these two is allocated in the cell chosen and
the plant or market whichever is satisfied is deleted. Both are deleted if
they are both satisfied due to equal demand and supply. If the plant is
satisfied in the allocation, then the demand at the market is adjusted and if
the market is satisfied, then the plant supply is adjusted. In case there is a
tie in the largest cost difference values, the one corresponding to which
larger number of units can be allocated is selected.
(iii) Calculate the cost differences again for the reduced problem and proceed
in the same manner as above. Repeat until all allocations are made.
In a given problem, one of these methods is used to find the initial solution. Usually,
the north-west corner rule is not used because it does not take cost into consideration
while making allocations. The other two methods tend to provide initial solution with
comparatively lower cost. Even in these two, the penalty method usually gives better
results.
2. Testing Optimality of the Solution Once the initial solution is obtained, it is tested
for optimality. For testing the solution for optimality, it is necessary that it should have r
+ c 1, where r is the number of rows and c is the number of columns, number of
occupied cells. If the number is less, the solution is termed as degenerate. Degeneracy is
discussed later.
For all rows and columns, ui and vj values are obtained. Each row and each column is
assigned one value in such a way that, corresponding to every occupied cell, the row ui
and the column vj add up to the cost value, cij. For this, one of the rows/columns is
assigned a value arbitrarily. Usually, the first row value u1 value is set equal to zero and
other values are determined one by one, using this and the other successively derived
values. Once all these values are obtained, calculate ij = ui + vj cij. Now, if all ij 0,
then the solution is optimal, otherwise not. A positive ij in a cell indicates that allocating

goods in that cell can reduce cost. Thus, if a cell 2,3 in the matrix has ij = 3, it means
that every unit allocated to this route, that is, every unit sent from plant 2 to market 3
would save cost at the rate of Rs 3 per unit.
3. Improving a Non-optimal Solution
If a solution is found to be non-optimal, it
is improved as follows. Beginning with the cell that has the largest ij value, draw a
closed path by moving alternately horizontally and vertically, taking turns at right angles,
and halting in occupied cells only, in such a way as to reach the same cell from where it
began. It may be noted that irrespective of the size of the given matrix; one and only
closed path can be traced starting from a given cell. The path can take any shape and the
movements can be clock-wise or anti clock-wise. Once the closed path is drawn, plus (+)
and minus () signs are placed alternately on the cells lying at the path, the first
movement being assigned a negative sign. After this, cells with the negative signs are
considered and the minimum quantity in them is determined. This is the maximum
quantity that can be transferred over the path for obtaining revised solution. Finally, the
quantity is added to the cells with (+) sign and subtracted from each cell with a () sign
and the revised solution is obtained. This solution is tested for optimality and improved in
the same manner, if necessary. The process is repeated until an optimal solution is found.
Unique vs. Multiple Optimal Solutions In the optimal solution, if all ij < 0, then the
solution is unique optimal solution. However, if some ij = 0, then the problem has
multiple optimal solutions. If an alternative optimal solution is desired, then draw the
closed path beginning with the cell having ij = 0 and find improved solution in same
manner as discussed earlier.
Prohibited Routes
If some route(s) is known to be prohibited, so that currently it is
not possible to send goods through that, then the cost element for that cell should be
replaced by a very prohibitive cost value, equal to M. After this, the problem is solved in
ordinary way.
Degeneracy As indicated, a transportation problem solution is said to be degenerate if
the number of occupied cells is less than r + c 1. In such a solution, optimality cannot
be tested since all ui and vj values cannot be determined. To remove degeneracy, an
infinitesimally small value is placed in each of the required number of unoccupied cells.
The quantity is defined such that it satisfies the following conditions: k + = k; k =
k; k = 0; and = 0. The cell/s in which is placed must be independent so that it is
not possible to draw a closed path starting with that particular cell. Among independent
cells, preference should be given to a cell that has the lowest cost.
Maximisation Transportation Problems
Sometimes, a problem may involve
transportation of goods from various plants to different markets so that profits may be
maximised. In such a case, unit profit matrix may be given along with demand and
supply values and it may be sought to determine how the allocations are done so that total
profit may be maximised. To solve such a problem, it is converted into a minimisation
problem by subtracting all the profit values from a constant value, usually the largest

value in the table, to get opportunity loss matrix. After this, the problem is solved in usual
manner.
Transhipment Problems
A transportation problem is regarded as a transhipment problem when shipment of goods
is also allowed from one source to another and from one destination to another. Thus, a
transportation problem with m-origins and n-destinations becomes a transhipment
problem with m + n sources and an equal number of destinations. With some minor
modifications, it is solved as a transportation problem.