Transportation Problem – Basic Notes

1. Definition:
The Transportation Problem is a type of Linear Programming Problem (LPP) where the objective is
to minimize the cost of transporting goods from multiple sources (supply) to multiple destinations
(demand) while satisfying supply and demand constraints.

Here are the basic assumptions of the Transportation Problem in a clear and student-friendly
format:

1. Known Supply and Demand

o The quantities available at each source (supply) and the quantities required at each
destination (demand) are known and fixed.

2. Linear Cost Structure

o The cost of transporting goods is directly proportional to the quantity transported.

That is, if 1 unit costs ₹10, then 10 units will cost ₹100.

3. Single Commodity

o Only one type of product or commodity is being transported from sources to

destinations.

4. No Intermediate Stops

o Goods are transported directly from sources to destinations without any

transshipment.

5. Balanced Problem (or Made Balanced)

o Total supply = Total demand. If not, the problem is balanced by adding a dummy row
or column with zero transportation cost.

6. Additivity and Non-negativity

o Total transportation cost is the sum of individual costs across all routes, and
transported quantities cannot be negative.

7. Constant Unit Costs

o Unit transportation cost for each route remains constant, regardless of the quantity
transported.

2. Formulation:
Let:
- m = number of sources
- n = number of destinations
- c_ij = cost of transporting 1 unit from source i to destination j
- x_ij = quantity transported from source i to destination j
- a_i = supply at source i
- b_j = demand at destination j

Objective Function:
Minimize Z = ΣΣ c_ij * x_ij

Subject to:
Σ x_ij (over j) = a_i (supply constraints)
Σ x_ij (over i) = b_j (demand constraints)
x_ij ≥ 0

3. Balanced vs. Unbalanced:

- Balanced: Total supply = Total demand
- Unbalanced: If not equal, add a dummy row or column with zero cost to balance.

4. Methods to Find Initial Basic Feasible Solution (IBFS):

A. North-West Corner Rule (NWCR)

Steps:
1. Start from top-left (NW corner).
2. Allocate minimum of supply or demand.
3. Adjust the remaining.
4. Move right or down.
5. Repeat until all allocations are done.

Features:
- Simple, fast.
- Does not consider cost.
- May give poor solution quality.

B. Least Cost Method (Matrix Minima)

Steps:
1. Identify the cell with lowest cost.
2. Allocate min(supply, demand) to that cell.
3. Eliminate row/column where allocation is completed.
4. Repeat the process with next lowest cost.

Features:
- Considers cost.
- Better than NWCR.
- Still may not give optimal result.

C. Vogel’s Approximation Method (VAM)

Steps:
1. Compute penalty for each row and column (difference between two lowest costs).
2. Select row/column with highest penalty.
3. Allocate to the cell with lowest cost in that row/column.
4. Adjust supply/demand and cross out fulfilled row/column.
5. Recalculate penalties and repeat.

Features:
- Most accurate IBFS.
- Closer to optimal.
- Slightly more time-consuming.

5. Final Solution (Optimality Test):

After IBFS is obtained, apply MODI (Modified Distribution) Method or Stepping Stone Method to test
and improve the solution for optimality.

Summary Table:
Method Cost Consideration Accuracy Complexity

NWCR No Low Very Easy

Least Cost Yes Medium Easy

VAM Yes High Moderate

Assignment Problem – Basic Notes
1. Definition:
The Assignment Problem is a special case of the transportation problem where the objective is to
assign a number of tasks to an equal number of agents at the minimum cost or maximum profit. Each
agent is assigned exactly one task and each task to one agent.

2. Formulation:
Let:
- n = number of agents/tasks
- c_ij = cost of assigning agent i to task j
- x_ij = 1 if agent i is assigned to task j, otherwise 0

Objective Function:
Minimize Z = ΣΣ c_ij * x_ij

Subject to:
Σ x_ij = 1 for each row (one task per agent)
Σ x_ij = 1 for each column (one agent per task)
x_ij ∈ {0, 1}

3. Hungarian Method:
Steps:
1. Subtract the row minimum from each row.
2. Subtract the column minimum from each column.
3. Cover all zeros using minimum number of lines (horizontal/vertical).
4. If lines = n, an optimal assignment is possible. Otherwise, adjust the matrix and repeat.

4. Balanced vs. Unbalanced:

- Balanced: Number of agents = number of tasks.
- Unbalanced: Add dummy rows or columns with zero cost to balance.
Degeneracy in Transportation Problem
1. Definition:
A transportation problem is said to be degenerate if the number of allocations in the initial basic
feasible solution is less than (m + n - 1), where m is the number of rows (sources) and n is the
number of columns (destinations).

2. Handling Degeneracy:
To resolve degeneracy, allocate a very small quantity ε (epsilon) in one of the unoccupied cells
(preferably with the lowest cost) to make the number of allocations equal to (m + n - 1). This ε has no
practical impact but ensures mathematical feasibility.
Simplex Method – Basic Notes with
Example
1. Definition:
The Simplex Method is a mathematical technique used to solve Linear Programming Problems (LPP)
with multiple constraints and variables. It helps in finding the maximum or minimum value of a
linear objective function.

2. Standard Form of LPP:

Maximize: Z = c₁x₁ + c₂x₂ + ... + cₙxₙ
Subject to:
a₁₁x₁ + a₁₂x₂ + ... + a₁ₙxₙ ≤ b₁
...
aₘ₁x₁ + aₘ₂x₂ + ... + aₘₙxₙ ≤ bₘ
x₁, x₂, ..., xₙ ≥ 0

3. Steps of Simplex Method:

1. Convert all inequalities to equalities by adding slack variables.
2. Set up the initial simplex tableau.
3. Identify the entering variable (most negative value in Z-row).
4. Identify the leaving variable (minimum ratio of RHS to pivot column).
5. Perform row operations to form a new tableau.
6. Repeat until there are no negative indicators in Z-row.
7. Read the optimal values from the final tableau.

4. Example:
Maximize Z = 3x₁ + 5x₂
Subject to:
x₁ + 2x₂ ≤ 100
x₁ + x₂ ≤ 80
x₁, x₂ ≥ 0

Step 1: Introduce slack variables:

x₁ + 2x₂ + s₁ = 100
x₁ + x₂ + s₂ = 80

Step 2: Initial Tableau:

| x₁ | x₂ | s₁ | s₂ | RHS
---|----|----|----|----|-----
S₁ | 1 | 2 | 1 | 0 | 100
S₂ | 1 | 1 | 0 | 1 | 80
Z | -3 | -5 | 0 | 0 | 0

Step 3: x₂ enters (most negative), s₁ leaves (min ratio 100/2 = 50).

Step 4: Do row operations to get new tableau.
Repeat until no negative in Z-row.
Final answer: x₁ = 0, x₂ = 50, Max Z = 250.

2.1.1 Modified Distribution (MODI) Method

The modified distribution method, also known as MODI method or (u, v) method pro- vides a
minimum cost solution to the transportation problem. In the stepping stone method, we have
to draw as many closed paths as equal to the unoccupied cells for their evaluation. To the
contrary, in MODI method, only closed path for the unoc- cupied cell with highest opportunity
cost is drawn. The method is outlined in the following :

1. After getting an initial BFS, determine the values of ui and vj so that ui + vj = cij
for the occupied cells.

2. For the unoccupied cells, compute the opportunity cost dij = cij − (ui + vj).

3. If all dij ≥ 0, the solution is optimal. On the other hand, if at least one dij < 0,
the solution is not optimal and further saving in transportation cost is
possible.

4. Select the unoccupied cell with the smallest negative opportunity cost as this
cell is to be included in the next solution.
 5. Draw a loop for the unoccupied cell selected in the previous step. The right
angle turn in this path is permitted only at occupied cells and at the original
unoccupied cell.

6. Assign alternate ‘+’ and ‘-’ signs on the corner points of the closed path,
starting from the unoccupied selected cell.

7. Determine the maximum number of units that should be shipped to this unoc-
cupied cell. The smallest value with a negative position on the loop indicates
the number of units that can be shipped to the entering cell. Now, add this
quantity to all the cells on the corner points of the loop marked with ‘+’ sign,
and subtract it from those cells marked with ‘-’ sign. In this way, an
unoccupied cell becomes an occupied cell.

8. Repeat the whole procedure until an optimal solution is obtained.

Example 2.2: Solve the following transportation problem:

Destination
D1 D2 D3 D4 Availability
O1 19 30 50 12 7
O2 70 30 40 60 10
Origin O3 40 10 60 20 18
Demand 5 8 7 15

Table 2.9: Transportation table for Example 2.2

Solution: An initial BFS obtained by Matrix minima method is shown in Table 2.10.

D1 D2 D3 D4 ai
O1
, ,
z7 r
O2 19 50 12 7
, , 30 , ,
z3 r z7 r
O3 70 30 40 60
, , , , , , 10
z2 r z8 r z8 r
40 10 20
60 18
bj 5 8 7 15

Table 2.10: Initial BFS by Matrix minima method

We now test the optimality by MODI method. For this, we calculate the values of ui’s (i = 1,
2, 3) and vj’s (j = 1, 2, 3, 4) for each occupied cell such that ui + vj = cij. We assign an arbitrary
value u1 = 0 and get

u1 + v4 = c14 → v4 = 12
u3 + v4 = c34 → u3 = 8
u3 + v2 = c32 → v2 = 2
u3 + v1 = c31 → v1 = 32
u2 + v1 = c21 → u2 = 38
u2 + v3 = c23 → v3 = 2

Now, we calculate the opportunity cost dij = cij − (ui + vj) for the unoccupied cells.

Unoccupied cell Opportunity cost dij

(O1, D1) c11 − (u1 + v1) = −13
(O1, D2) c12 − (u1 + v2) = 28
(O1, D3) c13 − (u1 + v3) = 48
(O2, D2) c22 − (u2 + v2) = −10
(O2, D4) c24 − (u2 + v4) = 10
(O3, D3) c33 − (u3 + v3) = 50

D1 D2 D3 D4 ai ui
-13 28 48 , ,
z7 r
O1 19 30 50 12
, , -10 , , 10
z3 z7 r 7 0
r 70 30 40 60
, , , , 50 , ,
O2 z2 z8 z8 r
r 40 r 10 60 20 10 38

O3
18 8

bj 5 8 7 15
vj 32 2 2 12

Table 2.11: Optimality test by MODI method

The opportunity costs are plotted in the transportation table within shadow boxes as shown in
Table 2.11. Since all dij § 0, the current solution is not optimal.
Now, we choose the most negative value (-13) from opportunity cost and draw a closed loop
starting from (O1, D1) to this cell back through the cells (O3, D1), (O3, D4) and (O1, D4) as
shown in Table 2.12.
 D1 D2 D3 D4 ai

, ,
-13 28 48
z7 r
O1 (+) ← ← ← ← ← (−) 7
← ← ← ↑ 12
↓ 19 30 50
, , -10 , , 10 ↑
O2 z3 r ↓ z7 r
↓ ↑ 10
↓ 70 30 40 ↑ 60
, , , , 50 , ,
z2 r ↓ z8 r z8 r
↑
O3 (−) → → → → (+)
→ → 18
40 → → 20
bj 5 8 7 15

Table 2.12: Loop for improving the solution

D1 D2 D3 D4 ai ui
, , 28 61 , ,
z r z5 r
2 19 30 50 12
O1 , , , ,
-23 -3
z r z7 r 7 0
3 70 30 40 60
13 , 63 , ,
,
O2 z8 z10
40 10 60 r 20
r 10 51

O3 18 8

bj 5 8 7 15
vj 19 2 -11 12

Table 2.13: Revised solution and test for optimality

The revised solution is shown in Table 2.13. The optimality test by MODI method
shows that all dij § 0. So, again we form a closed loop for the most negative oppor- tunity
cost (-23) as shown in Table 2.14 and trace out the smallest possible allocation amongst the
occupied cell in the closed loop, which is 3. We then obtain the fur- ther improved
solution as shown in Table 2.15. The optimality test by MODI method shows that all the current
opportunity costs are nonnegative (see the shadow boxes in Table 2.15). Hence the
optimality allocation is x11 = 5, x14 = 2, x22 = 3, x23 = 7, x32 = 5, x34 = 13 and the
corresponding minimum transportation cost is Rs.(19 × 5 + 12 × 2 + 30 × 3 + 40 × 7 + 10
× 5 + 20 × 13) = Rs.799.
 D1 D2 D3 D4 ai

, , 28 61 , ,
O1 z r z5 r
2
(+) ← ← ← ← ← ← ← ← (−)
7
↓ 19 30 50 ↑ 12
, , -23 , , -3 ↑
z r ↓ z7 r
3 (+)
(−) → → ↑
O2
70 ↓ 30 40 ↑ 60
13 , , 63 , , 10
z8 ↓ z10 r ↑
r (−) → → → → → (+)
40 10 60 20
O3

18

bj 5 8 7 15

Table 2.14: Loop for further improving the solution

D1 D2 D3 D4 ai ui
, , 28 38 , ,
z5 r z2 r
O1 19 30 50 12
23 , , , , 20
z r z7 r 7 0
70 3 60
30 40
13 , , 40 , ,
O2 z r z13
40 5 60 r
10 20 10 28

O3
18 8

bj 5 8 7 15
vj 19 2 12 12

Table 2.15: Improved solution and test for optimality by MODI method

2.2 Some Special Cases of Transportation

Problem
2.2.1 Degeneracy in Transportation Problem
If the basic feasible solution of a TP with m origins and n destinations has fewer than (m + n
− 1) positive xij (occupied cells) then the problem is said to be a degenerate TP. To resolve
degeneracy, we assign a small arbitrary quantity (ϵ) to that unoccupied cell which has the
minimum transportation cost. Consider the TP given in Table 2.16.

An initial BFS (see Table 2.17) obtained by Matrix minimum method shows that the number
of basic variables = 5 < m + n − 1 = 6. Hence, it is a degenerate TP. To resolve
 Destination

D1 D2 D3 D4 Supply
O1 2 2 2 4 1000
O2 4 6 4 3 700
Origin
O3 3 2 1 0 900
Demand 900 800 500 400

Table 2.16: Transportation table

D1 D2 D3 D4 ai

2 2 2 4
O1 , , , ,
1000
z900 z10 r
r 0
4 6 4 3
O2 , ,
700
z70 r
0
O3 3 2 1 0
, , , , 900
bj 900 800 500 400

Table 2.17: Initial BFS by Matrix minima method

degeneracy, we assign a very small quantity ϵ(> 0) to that unoccupied cell which has the
minimum transportation cost. In Table 2.17, there is a tie in selecting the smallest unoccupied
cell. So, we choose the cell (O3, D2) arbitrarily, see Table 2.18.

D1 D2 D3 D4 ai

2 2 2 4
O1 , , , ,
1000
z900 z100 r
r
O2 4 6 4 3
, ,
700
z700 r
3 2 1 0
O3 , , , , , ,
zϵ r z500 z400 900 + ϵ
bj 900 800 + ϵ 500 400

Table 2.18: Resolving degeneracy

Now, we use the stepping stone method to find an optimal solution. We calculate the
opportunity cost for all unoccupied cells as given below:
 Unoccupied cell Increase in cost per unit Remarks
of reallocation
(O1, D3) +2 − 2 + 2 − 1 = 1 Cost increases
(O1, D4) +4 − 2 + 2 − 0 = 4 Cost increases
(O2, D1) +4 − 6 + 2 − 2 = −2 Cost decreases
(O2, D3) +4 − 6 + 2 − 1 = −1 Cost decreases
(O2, D4) +3 − 6 + 2 − 0 = −1 Cost decreases
(O3, D1) +3 − 2 + 2 − 2 = 1 Cost increases

The cell (O2, D1) is having the maximum improvement potential, which is equal to −2. The
maximum amount that can be allocated to (O2, D1) is 700 and this will make the current basic
variable corresponding to cell (O2, D2) non-basic. The improved solution is shown in Table
2.19.

D1 D2 D3 D4 ai

2 2 2 4
O1 , , , ,
1000
z200 z800 r
r
O2 4 6 4 3
, ,
700
z700
r
O3 3 2 1 0
, , , , , , 900 + ϵ
bj 900 800 + ϵ 500 400

Table 2.19: Improved solution

As no further improvement is possible, the optimal solution is x11 = 200, x12 = 800, x21 = 700, x32
= ϵ, x33 = 500, x34 = 400 and the corresponding transportation cost is Rs.(2 × 200 + 2 × 800 + 4
× 700 + 2 × ϵ + 1 × 500 + 0 × 400) = Rs.(5300 + 2ϵ). Since ϵ is a very small quantity, it can be
neglected. Thus, the net transportation cost is Rs.5300.

2.2.2 Unbalanced Transportation Problem

∑m ∑n
A transportation problem is called unbalanced if ai i=1
s j=1
bj. The problem can
be made balanced by introducing dummy source with zero costs of transporting from this
source to all destinations, or dummy destination with zero costs of transporting to this
destination.

Example 2.3: Consider the transportation problem presented in the following table.
 Destination
D1 D2 D3 Supply
O1 28 17 26 500
O2 19 12 16 300
Demand 250 250 500
Origin

Table 2.20: Transportation table for Example 2.3

∑2 ∑3
Solution: The given transportation problem is unbalanced as i=1 ai = 800 < j=1 bj =

1000. To solve this problem, we introduce a dummy row with transportation cost zero
and availability 200, see Table 2.21. Using Matrix minima method, an initial BFS is
obtained as shown in Table 2.22. The corresponding transportation cost is Rs.(50 × 28 +
450 × 26 + 250 × 12 + 50 × 16 + 200 × 0) = Rs.16900. For optimality test, one can use MODI
method as explained before. Further, improvement in the solution can be done by forming
loop, if needed.

D1 D2 D3 ai

Destination 28 17 26
O1 , , , ,
D1 D2 D3 Supply
O1 28 17 26 500 z50 r z450 r500

O2 19 12 16 300 19 12 16
Origin O2 , , , ,
Dummy 0 0 0 200
50 0
Demand 250 250 500
z2 r z5 r300
0 0 0
Dummy ,
,

z200 r
200

bj 250 250 500

Table 2.21: Unbalanced transportation table
Table 2.22: Initial BFS
2.2.3 Prohibited Transportation Routes
Sometimes there may be situations (e.g., road construction, bad road condition, strike,
unexpected flood, local traffic rule, etc.) where it is not possible to use certain routes in a
transportation problem. To handle such type of problems, a very large cost M or

∞ is assigned to each of such routes which are not available.

Consider the following transportation problem in which the allocations in the cells (O1, D2)
and (O3, D2) are prohibited.

We assign a cost ∞ to each of these cells and determine the initial BFS by Matrix minima
method as shown in Table 2.24.
 Destination
D1 D2 D3 Supply
O1 16 – 12 200
O2 14 8 18 160
O3 26 – 16 90
Origin
Demand 180 120 150

Table 2.23: Example of prohibited transportation route

D1 D2 D3 ai

16 ∞ 12
O1 , , , ,

z50 r z150 r 200

14 8 18
O2 , , , ,

z40 r z120 r
160

26 ∞ 16

O3 , ,

z90 r 90

bj 180 120 150

Table 2.24: Initial basic feasible solution

2.2.4 Maximization Transportation Problem

There are certain types of transportation problem where the objective function is to be
maximized instead of being minimized. These problems can be solved by converting the
maximization problem into a minimization problem. For this, replace each cost element by the
difference from the maximum cost element of the transportation table.

Example 2.4: Suppose that three factories X, Y , and Z supply goods to four deal- ers
spread all over the country. The production capacities of these factories are 200, 500 and 300
units per month, respectively. Transportation costs from the factories to the dealers are given
in the following Table 2.25. Determine a suitable allocation to maximize the total net return.
Solution: Maximization transportation problem can be converted into minimization
transportation problem by subtracting each transportation cost from the maximum
transportation cost. Here, the maximum transportation cost is 25. So, we subtract each
cost from 25. The revised transportation problem is shown in Table 2.26. The initial BFS
obtained by Matrix minima method is given in Table 2.27.
 Destination
D1 D2 D3 D4 Availability
X 12 18 6 25 200
Y 8 7 10 18 500
Z 14 3 11 20 300
Origin
Demand 180 320 100 400

Table 2.25: Transportation table for Example 2.4

Destination

D1 D2 D3 D4 ai
X 13 7 19 0 200
Origin Y 17 18 15 7 500
Z 11 22 14 5 300
bj 180 320 100 400

Table 2.26: Revised transportation table

D1 D2 D3 D4 ai
13 7 19 0
X , ,

, , z200 r 200
z80
18 15 7
r
Y 17 ,
, , ,

z320 14 z100 r
500
11 22 r
5
Z , ,
, ,
 z100 r z200 r 300

bj 180 320 100 400

Table 2.27: Initial BFS by Matrix minima method