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A simple heuristic for solving small xed-charge

transportation problems
Veena Adlakhaa;∗ , Krzysztof Kowalskib
a University
of Baltimore, 1420 N. Charles Street, Baltimore, MD 21201, USA
b Department of Transportation, State of Connecticut, 121 Cimarron Road, Middletown, CT 06457, USA
Received 14 December 2001; accepted 29 January 2003

Abstract
The xed-charge transportation problem (FCTP) is an extension of the classical transportation problem in which a xed
cost is incurred, independent of the amount transported, along with a variable cost that is proportional to the amount shipped.
The introduction of xed costs in addition to variable costs results in the objective function being a step function. Therefore,
xed-charge problems are usually solved using sophisticated analytical or computer software. This paper deviates from that
approach. It presents a simple heuristic algorithm for the solution of small xed-charge problems. We present numerical
examples to illustrate applications of the proposed method.
? 2003 Elsevier Science Ltd. All rights reserved.

Keywords: Fixed-charge; Transportation problem; Heuristic algorithm

1. Introduction on the optimal solution to the variable portion of the prob-

The xed-charge transportation problem (FCTP) is a
mathematical programming problem in which a xed cost,
sometimes called a setup cost, is incurred if another related
variable assumes a nonzero value. The problem has a wide
variety of classic applications that have been documented
in the scheduling and facility location literature. Two of the
most common of these arise (1) in making warehouse or
plant location decisions, where there is a charge for opening
the facility, and (2) in transportation problems, where there
are xed charges for transporting goods between demand
and supply points.
While even a sizable transportation problem (TP) can be
solved relatively easily by hand, such is not the case with
a FCTP. The best widely known exact method of ranking
extreme points requires analyzing a big domain of load dis-
tributions. The size of the domain depends on the initial dis-
tribution. Murty [1] suggested an initial distribution based
∗ Corresponding author. Tel.: +1-410-837-4969; fax: +1-410-
837-5675.
E-mail address: vadlakha@ubmail.ubalt.edu (V. Adlakha).
lem, which he admitted himself is a weak start for problems
with big xed charge values. Sadagopan and Ravindran [2]
improved the situation with a dual approach by solving the
xed charge portion of the problem and switching to it if
it gives better result than Murty’s method. As they demon-
strated, their technique provides a considerable improvement
over Murty but still requires analyzing a sizable domain of
distributions.
One approach to solving FCTP involves a mixed integer
programming formulation. Gray [3] has attempted to pro-
vide an exact solution to this problem by decomposing it
into a master integer program and a series of transporta-
tion sub-programs. In contrast Palekar et al. [4] and Stein-
berg [5] attempted to provide exact algorithms based on
the branch-and-bound method. The exact branch and bound
method is not practical for solving a FCTP by hand. Find-
ing a solution to a 4 by 4 problem requires analyzing sev-
eral hundred distributions. There are many instances (e.g., in
the area of solid-waste management, Walker [6]) in which
the dimensions of the problem are relatively small, and for
which a solution via a simple heuristic procedure does in-
deed have merit. Solving such problems manually has the

0305-0483/03/$ - see front matter ? 2003 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S0305-0483(03)00025-2
206 V. Adlakha, K. Kowalski / Omega 31 (2003) 205 – 211
added advantage of providing the analyst with a thorough
understanding of how optimality is achieved.
This paper develops a relatively simple procedure to solve
a FCTP. Managers without a strong mathematical back-
ground can master it. Although the proposed method is more
time consuming than the algorithms for solving a regular TP,
it provides a good foundation for solving small problems by
hand. It also introduces an optimality test. The method uses
elements of heuristic approaches developed by Cooper and
Drebes [7], Drenzler [8], Steinberg [5], Cooper [9], Walker
[6], and Sun et al. [10]. These methods try to reach the opti-
mum through simplex like iterations. Since there is no guar-
antee that the obtained minimum solution is global and not
local, they experiment with substituting diHerent combina-
tions of variables in an eHort to obtain a better solution. None
of these methods puts much emphasis on the initial solution.
Other well-known heuristic approaches are those by Diaby
[11], and Kuhn and Baumol [12]. Sandrock [13] presents
a simple algorithm for the solution of small, xed-charge
problems where the xed charge is associated with the sup-
ply points instead of the routes considered in this paper.
The proposed method tries to obtain the best solution in
the rst iteration and uses the simplex like iterations either
to verify the minimum conditions, or, eventually, to perform
the nal convergence. When solving a problem by hand, the
latter is done by using a simpli ed “one step pivot method”
introduced by Murty [1]. Those willing to accept a chance
that the achieved best solution in the rst iteration may not
be optimal, can skip the second part. It must be noted that
the rst part of the proposed method can also be used to
solve large xed charge transportation problems which can-
not be solved by other heuristic methods due to a shortage
of computer memory or a limit on the computing time.
2. Fixed-charge transportation problem
The xed-charge transportation problem can be stated as
a distribution problem in which there are m suppliers (ware-
houses or factories) and n customers (destinations or de-
mand points). Each of the m suppliers can ship to any of
the n customers at a shipping cost per unit cij (unit cost for
shipping from supplier i to customer j) plus a xed cost fij ,
assumed for opening this route. Each supplier i = 1; 2; : : : ; m
has ai units of supply, and each customer j = 1; 2; : : : ; n has
a demand of bj units. The objective is to determine which
routes are to be opened and the size of the shipment on those
routes, so that the total cost of meeting demand, given the
supply constraints, is minimized.
Standard FCTP formulation:

m
n
P: Minimize Z = (cij xij + fij yij ); (1)
i=1 j=1
Subject to

n
xij = ai for i = 1; 2; : : : ; m; (2)
j=1


m
xij = bj for j = 1; 2; : : : ; n; (3)
i=1
xij ¿ 0 for all (i; j);
yij = 0 if xij = 0;
yij = 1 if xij ¿ 0:
Without loss of generality, we assume that

m
n
ai = bj
i=1 j=1
ai ; bj ; cij ; fij ¿ 0:
Despite its similarity to a standard TP problem, FCTP
is signi cantly harder to solve because of the discontinuity
in the objective function Z introduced by the xed costs.
Hirsch and Danzig [14] established that the feasible region
of FCTP is a bounded convex set with a concave objective
function. An optimal solution occurs at an extreme point of
the constraint set, and for a non-degenerate problem with
all positive xed costs, every extreme point of the feasible
region is a local minimum. We will use this property when
checking the optimum conditions for a derived solution.
The proposed algorithm consists of two parts. In the rst
part, the algorithm nds a strong initial feasible solution, and
in the second part it develops steps for the search and veri-
cation of the optimum. The procedure developed in the
second part can be used independently with other crude ap-
proximation methods, but this can result in a signi cant
increase in eHort. In addition, the same procedure can be
used to nd a minimum for any concave function with
transportation-type constraints.
3. Part I—initial feasible solution
The process of nding a strong initial solution for our
method depends on Balinski’s method and the Vogel Ap-
proximation Method (VAM). We will also “Hungarize” the
pre-VAM matrix that is known to improve this method.
The reader may refer to Hillier and Lieberman [15] and
Wagner [16] for coverage of the VAM technique and cover-
age of classical TP. Balinski [17] observed that there exists
an optimal solution to the relaxed version of FCTP (formed
by relaxing the integer restriction on yij ), with the property
that
yij = xij =mij ; (4)
where
mij = min(ai ; bj ): (5)
So, the relaxed transportation problem (RTP) of an FCTP
would be simply a standard TP with unit transportation costs
as Cij = cij + fij =mij . We refer to this problem as P  and use
this RTP formulation of FCTP to develop an initial feasible
solution. The optimal solution {Xij } to the RTP problem P 
 V. Adlakha, K. Kowalski / Omega 31 (2003) 205 – 211
can be easily modi ed into a feasible solution of {Xij ; yij }
of P as follows:
yij = 0 if Xij = 0;
and
yij = 1 if Xij ¿ 0:
Balinski shows that the optimal value of RTP provides a
lower bound on the optimal value Z ∗ (P) of FCTP and





Cij Xij 6 Z ∗ (P) 6 (cij Xij + fij yij ):
Remark 1. Since FCTP is a discrete function, the lower
bound in Eq. (6) from the optimal solution of the RTP can
be rounded up to the nearest interval.
3.1. A pre-screening algorithm
Before we consider the RTP formulation of an FCTP by
Balinski [17], we introduce a “Pre-screening algorithm” to
identify all xed costs fst∗ that will appear in every possible
distribution (xij ; yij ) for a given FCTP. This phenomenon is
especially present in many small problems.
Reformulating Eq. (1), we get



Z = fst∗ + min {cij xij + (fij yij | i = s
and j = t)};
where



fij = fst∗ if ai ¡ bt or b j ¡ as :
i=s j=t
After identifying a xed cost fst∗ , the value of fst is set to
0 to solve the FCTP and this xed cost is added to the cost
of nal solution. Please see Adlakha and Kowalski [18] for
more details on the pre-screening algorithm.
Hungarization is a well-known process used in optimiza-
tion. The process involves what is called matrix reduction
through row and column reduction. Hungarization consists
of subtracting the smallest element in each row from every
element in that row. Then, using the row-reduced matrix,
the smallest element in each column is subtracted from ev-
ery element in that column. The problem presented by this
reduced matrix is equivalent to the original problem in the
sense that the same solution will be optimal.
3.2. Procedure for the initial solution
Step 1: Pre-screen the FCTP to identify and separate any
xed costs fst∗ .
Step 2: Formulate Balinski’s RTP matrix with Cij = cij +
fij =mij .
Step 3: Hungarize the RTP matrix.
Step 4: Identify critical location/s using VAM.
Step 5: Load the VAM critical location, say cell (s; t),
with the maximum feasible amount.
207
Step 6: Reduce/adjust the FCTP matrix by deleting the
recent satis ed constraint/s.
Step 7: If the loading assignment is not complete, go to
Step 1.
Step 8: Stop. Record the solution as the initial feasible
solution (extreme point), x(1) .
In case of a tie in VAM coeNcients in Step 4, pick the lo-
cation based on the other (row or column) VAM coeNcient.
Remark 2. For the initial solution x(1) = {Xij(1) },
(6)




Cij Xij 6 Cij Xij(1) (8)
since {Xij(1) } is a feasible solution to P  and Xij is the optimal
solution to problem P  .
Note that after deleting the recently satis ed constraint
in Step 6, we reformulate Balinski’s RTP matrix for the
remaining problem. By construction, successive mij values
decrease as either row or column constraints are satis ed,
resulting in increased cij + fij =mij values for the reduced
RTP matrix.
Remark 3. For the initial solution x(1) = {Xij(1) }



Z ∗ (P) 6 (cij Xij(1) + fij yij(1) ) (9)
(7) since {Xij(1) ; yij(1) } is a feasible solution to problem P where
yij(1) = 1 if Xij(1) ¿ 0 and Z ∗ (P) is the optimal value of the
problem P.
4. Part II—improvement and veri"cation of the optimum
The second part of the proposed method is based on the
concavity of the objective function. Let {x(1) ; x(2) ; : : : ; x(k) }
be a sequence of extreme points (alternatively referred to
as peaks) of the xed-charge problem ranked in decreasing
order of value of objective function Z(x). Starting with the
initial solution x(1) , the algorithm recursively investigates all
adjacent peaks of the best solution obtained until that point.
If Z(x(k) ) ¡ Z(x) for all adjacent peaks of x(k) , then solution
x(k) is considered the nal solution of the FCTP.
The adjacent peaks can be found through perturbing the
load distribution obtained in Part I by using elements of
Murty’s “one step pivot operation”. This method is based
on the fact that the FCTP has the same constraints as regu-
lar TP with identical set of ai and bj values. In the case of a
transportation tableau, the search simply translates into per-
turbing each load using only one stepping-stone move. Each
perturbation should result in the complete relocation of at
least one load (emptying one location). It must be noted that
some loads can be perturbed several times while involving
a diHerent pair each time. Each obtained distribution will
correspond to an adjacent peak. If any peak yields a lower
value of Z, we move to this location and again analyze the
208 V. Adlakha, K. Kowalski / Omega 31 (2003) 205 – 211

adjacent locations. This process is repeated until the opti- Steps 3 & 4: The VAM coeNcients of the Hungarized
mality conditions are ful lled. RTP matrix are as follows, with ∗ identifying the critical
Speci cally, the steps for Part II are as follows: VAM location.
Step 1: Set i = 1.
Step 2: Determine all peaks adjacent to x(i) . Let x∗ denote VAM coeNcients 0 1.67 0
the peak with the smallest Z(x).
Step 3: If Z(x(i) ) ¡ Z(x(∗) ), go to Step 5. 1.67 0 1.67 3
Step 4: Set i = i + 1. Let x(i) = x∗ . Go to Step 2. 0 1.83 0 0
Step 5: Stop. Record x(i) as the optimal solution of FCTP. 1.92 0∗ 1.92 2.17
1.5 1.5 2.17 0

5. Illustrative numerical examples Step 5: Load cell (3, 1) with 20.

Step 6: The adjusted reduced FCTP is as follows:
The proposed two-part algorithm constitutes the rst
“down to earth” heuristic method for nding a good solution
b2 b3 Supply
for a FCTP. As demonstrated by the following numerical
examples, the minimum found by the proposed method will a1 (30, 3) (20, 4) 10
most likely be the global solution for small problems. To a2 (30, 2) (20, 1) 30
illustrate steps of the algorithm, we consider the example a3 (30, 4) (20, 3) 20
from Balinski [17] (see Table 1). a4 (30, 5) (20, 2) 20
Demand 50 30
5.1. Part I—:nding the initial solution
Step 7: Since the loading assignment is not complete, we
Steps 1 & 2: No need to carry out Step 1 here. Formulating go back to step 1.
this FCTP as an RTP following Balinski [17], we obtain The VAM coeNcients of the Hungarized RTP matrix of
Table 2. the reduced FCTP are as follows:
An optimal solution to this RTP is X12 =10; X22 =20; X23 =
10; X31 =20; X32 =20, and X43 =20, to ship 100 units at a cost VAM coeNcients 1.33 0
 
Cij Xij = $321:70. Since (cij Xij + fij yij ) = 360,
0 0 0
Eq. (6) implies 321:70 6 Z 6 360. Note that the minimum
1.33 1.33 0
interval between the xed cost value fij is equal to 10 and
1.5 1.5 0
the minimum load is also a multiple of 10. Therefore, using
3.5 3.5 0∗
Remark 1, we can round up the lower bound to the optimal
value Z of the FCTP to 330.
Load cell (4, 3) by 20. The adjusted reduced FCTP is as
Table 1 follows:
Cost matrix (fij ; cij ) for numerical Example 1
b2 b3 Supply
b1 b2 b3 Supply
a1 (30, 3) (20, 4) 10
a1 (10, 2) (30, 3) (20, 4) 10 a2 (30, 2) (20, 1) 30
a2 (10, 3) (30, 2) (20, 1) 30
a3 (30, 4) (20, 3) 20
a3 (10, 1) (30, 4) (20, 3) 40
a4 (10, 4) (30, 5) (20, 2) 20
Demand 50 10
Demand 20 50 30
Using the Pre-screening algorithm, since a1 + a2 ¡ b1 and
a1 + a3 ¡ b1 , the modi ed cost matrix is

(30, 3) (20, 4)
Table 2
Balinski cost matrix Cij = (cij + fij =mij ) for numerical Example 1
(0, 2) (20, 1)
(0, 4) (20, 3)
b1 b2 b3 Supply

a1 3 6 6 10 Continuing the steps of Part I, we obtain an initial solution

a2 3.5 3 1.67 30 x(1) of the FCTP of Table 1 as X13 = 10; X22 = 30; X31 =
a3 1.5 4.75 3.67 40 20; X32 = 20, and X43 = 20, to ship 100 units at a cost of
a4 4.5 6.5 3 20 Z(x(1) ) = 350. Therefore, using Remark 3 and this solution,
Demand 20 50 30 330 6 Z ∗ 6 350.
 V. Adlakha, K. Kowalski / Omega 31 (2003) 205 – 211 209

Table 3
Cost matrix (fij ; cij ) for Example 2

b1 b2 b3 b4 Supply

a1 (900, 760) (1000, 71) (700, 283) (800, 594) 50

a2 (900, 594) (300, 64) (700, 170) (600, 564) 15
a3 (600, 594) (200, 69) (400, 79) (0, 202) 5
Demand 25 20 15 10

Table 4
Modi ed cost matrix (fij ; cij ) for numerical Example 2

b1 b2 b3 b4 Supply

a1 (0, 760) (1000, 71) (700, 283) (800, 594) 50

a2 (900, 594) (300, 64) (700, 170) (600, 564) 15
a3 (600, 594) (200, 69) (400, 79) (0, 202) 5
Demand 25 20 15 10

5.2. Part II—improvement and veri:cation Table 5

Balinski matrix Cij = (cij + fij =mij ) of RTP of Example 2
The solution x(1) obtained in Part I is degenerate
b1 b2 b3 b4 Supply
with 5 loaded cells. Now we investigate adjacent peaks
to verify if an improvement to the initial solution is a1 760 121 329.66 674 50
possible. a2 654 84 216.66 624 15
The following solutions are obtained. a3 714 109 159 202 5
Peak 1: X12 = 10; X22 = 20; X23 = 10; X31 = 20; X32 = 20, Demand 25 20 15 10
and X43 = 20, with Z(peak 1) = 360.
Peak 2: X12 = 10; X22 = 30; X31 = 20; X32 = 10; X33 = 10,
and X43 = 20, with Z(peak 2) = 360.
Peak 3: X11 = 10; X22 = 30; X31 = 10; X32 = 20; X33 = 10, algorithm, since b2 +b3 +b4 ¡ a1 , the cost matrix in Table 3
and X43 = 20, with Z(peak 3) = 360. is modi ed as in Table 4. Formulating this FCTP as an RTP
Peak 4: X13 = 10; X21 = 20; X22 = 10; X32 = 40, and following Balinski [17], we obtain Table 5. Cell (3, 4) is
X43 = 20, with Z(peak 4) = 430. critical using VAM coeNcients of the Hungarized RTP ma-
Peak 5: X13 = 10; X22 = 30; X32 = 20; X33 = 20, and trix. Set X34 = 5. Delete the third row. The reduced/adjusted
X41 = 20, with Z(peak 5) = 430. RTP matrix after pre-screening is:
Peak 6: X13 = 10; X22 = 30; X31 = 20; X33 = 20, and
b1 b2 b3 b4 Supply
X42 = 20, with Z(peak 6) = 390.
Peak 7: X13 = 10; X22 = 10; X23 = 20; X31 = 20; X32 = 20, a1 (0, 760) (0, 71) (700, 283) (800, 594) 50
and X42 = 20, with Z(peak 7) = 420. a2 (900, 594) (300, 64) (700, 170) (600, 564) 15
Demand 25 20 15 5
Since all extreme points adjacent to initial solution x(1)
have higher value of the FCTP objective function, we stop with the corresponding Balinski RTP Matrix
and consider solution x(1) as the optimum solution. As
veri ed by the authors using the Ranking Extreme Points b1 b2 b3 b4
Method [1], the solution x(1) is indeed the global optimum.
It should be noted that Balinski’s method also yielded a a1 760 71 329.66 754
quite satisfactory result with a cost of 360 (only 10 more a2 654 84 216.66 684
than the best solution).
Now cell (2, 3) is VAM critical from the Hungarized RTP
matrix. Set X23 = 15 and delete the second row and third
column. We obtain an initial solution x(1) of FCTP of Table
5.3. Illustrative numerical Example 2 3 as X34 = 5; X23 = 15; X11 = 25; X12 = 20, and X14 = 5
at a cost of Z(x(1) ) = 30350. The value of RTP solution
We next consider the example from Sadagopan and (Table 5) at x(1) is 29950 (29050+900). Using this solution
Ravindran [2] (see Table 3). Using the Pre-screening 29950 6 Z ∗ 6 30350.
210 V. Adlakha, K. Kowalski / Omega 31 (2003) 205 – 211
Table 6
Comparison of computational eNciency
Ratio of xed to Number of stages of ranking
variable costs at optimum
Murty’s S&R’s Proposed
method method method
0.126 21 12 1 treme points in increasing order of the variable costs. The
0.219 24 14 1
0.312 26 14 1
0.404 26 14 1
0.590 27 16 1 For many problems of relatively small dimensions, a so-
An investigation of the adjacent 6 peaks provides solu-
tions with the value of the objective function ranging from
31265 to 38055. Hence we stop with x(1) as the solution of
FCTP. As shown by Sadagopan and Ravindran [2], after 12
stages of ranking, x(1) is the optimal solution.
6. Concluding remarks
We have developed a simple, eNcient heuristic procedure
for solving small xed-charge transportation problems. The
proposed method obtains the best initial solution in Part I and
uses simplex like iterations in Part II to improve that solution
and to verify its optimality. It must be noted that the rst
part of the proposed method can also be used to solve large
xed charge transportation problems which cannot be solved
by other heuristic methods due to a shortage of computer
memory or a limit on the computing time. As demonstrated
by the numerical examples of small problems, the initial
solution of Part I is most likely the global solution.
To investigate the computational eNciency of the pro-
posed method, we follow the comparison model used by
Sadagopan and Ravindran [2]. We solved the numerical Ex-
ample 2 illustrated above by increasing all the xed costs
by 500, 1000, 1500, and 2500. Murty’s ranking method [1]
was used to determine the optimal solution. The results re-
ported by Sadagopan and Ravindran [2] as compared to the
proposed method are presented in Table 6.
The proposed heuristic delivered the optimal solution us-
ing only one stage of ranking regardless of the ratio of xed
costs to variable costs. Murty [1] presents an example of
FCTP of size 5 by 7 and ranks all extreme points to nd the
optimal solution. The proposed method delivered the ini-
tial solution obtained in Part I in the following sequence:
X27 =26; X12 =9; X43 =35; X14 =14; X35 =8; X47 =9; X54 =
40; X46 = 31, X36 = 24; X31 = 6, and X51 = 16. This matches
the optimal solution obtained by Murty. Though any de nite
conclusion needs an extensive computational study, the pro-
posed method demonstrates signi cant improvement over
existing heuristic methods for small xed-charge transporta-
tion problems.
Note that those practitioners willing to accept a chance
that the achieved best solution in the rst iteration may not
be the optimal one can skip the second part. This latter part
is done by using a simpli ed “one step pivot method” intro-
duced by Murty [1], who develops a pattern of search among
the extreme points of FCTP for determining the global min-
imum. His pattern of search is essentially a ranking of ex-
xed costs are then added to each ranked vertex in deter-
mining the optimal solution.
lution via a simple “hands on” procedure does have merit.
The typical solid-waste management problem, in which op-
timum strategies are sought regarding the location and de-
gree of activity with tip sites, transfer stations and collection
depots, falls into such a category. Solving such xed-charge
problems manually has the added advantage of providing
the analyst with a through understanding of how the opti-
mality was achieved. Future work should seek the devel-
opment of an eNcient code to implement this approach for
computational and comparative studies.
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