Distribution Model

- Transportation

Aben, Winhiele
Orate, Karina
 Mathematical simulation of

Distribution the key decisions

associated with a

model distribution channel to

compute the optimal
solutions regarding
inventory, warehousing,
routing, transportation,
and other such factors
Three methods under distribution model

TRANSPORTATION MODEL TRANSSHIPMENT MODEL ASSIGNMENT MODEL

TRANSPORTATION
MODEL
 Transportation models play

TRANSPORTATION an important role in

logistics and supply chain
MODEL management for reducing
cost and improving service
TRANSPORTATION It deals with
transportation problems
MODEL
 ● To minimize the cost of
delivering products
TRANSPORTATION from several sources of
origins to several
MODEL destinations
Objectives: ● To determine the target
segments and the best
channels for each
segment
 ● To determine the
TRANSPORTATION shipping schedule that
MODEL minimizes the total
shipping cost while
Objectives: satisfying supply and
demand constraints
 ● objectives may vary
with product
TRANSPORTATION characteristics e.g
MODEL Perishable, bulky
products, non-standard
Objectives: items, products
requiring installation
and maintenance
TRANSPORTATION MODEL CHARACTERISTICS

•A product is to be transported from a number of sources to

a number of destinations at the minimum possible cost

•Each source can supply a fixed number of units of the

product, and each destination has a fixed demand for the
product.
TRANSPORTATION MODEL CHARACTERISTICS

•Constraints contain inequalities in unbalanced models

where supply is not equal to demand.
 ● Transportation problem is a
linear programming problem
that deals with identifying
an optimal solution for the
transportation and
TRANSPORTATION PROBLEM allocation of resources to
various destinations and
from one site to another,
while keeping the
expenditure to a minimum.
 ● The problem of finding
the minimum-cost
distribution of a
given commodity from a
group of supply
TRANSPORTATION PROBLEM
centers (sources) i=1,
……., m, to a group of
receiving centers
(destinations) j=1,
……..,n
 ● Each source has a certain
supply (si)
● Each destination has a
TYPES OF TRANSPORTATION certain demand (dj)
PROBLEM ● The cost of shipping from a
source to a destination is
directly proportional to
the number of units shipped
TYPES OF TRANSPORTATION PROBLEM

BALANCED UNBALANCED
TRANSPORTATION TRANSPORTATION
PROBLEM PROBLEM

WHERE THE TOTAL SUPPLY IS WHERE THE TOTAL SUPPLY IS

EQUAL TO THE TOTAL DEMAND NOT EQUAL TO THE TOTAL
DEMAND
PHASES OF SOLUTION

PHASE I Obtains the basic feasible solution

PHASE II Obtains the optimal basic solution

PHASE 1 – methods of finding basic feasible solution

North-west corner method

Least cost entry method

Vogel’s approximation method

 Northwest Corner Method
is a method adopted to compute the initial feasible solution of the
transportation problem. The name North-west corner is given to this method
because the basic variables are selected from the extreme left corner.

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 Northwest Corner Method
is a method adopted to compute the initial feasible solution of the
transportation problem. The name North-west corner is given to this method
because the basic variables are selected from the extreme left corner.

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 Northwest Corner Method

The northwest-corner rule requires that we start in the upper left-hand cell (or
northwest corner) of the table and allocate units to shipping route as follows:

1. Exhaust the supply (factory capacity) of each row before moving down to
the next row.

2. Exhaust the (warehouse) requirements of each column before moving to

the next column on the right.

3. Check to ensure that all supplies and demands are met.

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 Least cost entry
The intuitive method makes initial allocations based on lower cost. This
straightforward approach uses the following steps:

1. Identify the cell with the lowest cost. Break any ties for the lowest cost
arbitrarily.
2. Allocate as many units as possible to that cell without exceeding the supply
or demand. Then cross out that row or column (or both) that is exhausted by
this assignment .
3. Find the cell with the lowest cost from the remaining (not crossed out) cells.
4. Repeat steps 2 & 3 until units have been allocated.
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Vogel’s Approximation Method
Step 1. Determine the difference between the lowest two cells in all rows and columns, including dummies.

Step 2. Identify the row or column with the largest difference. Ties may be broken arbitrarily.

Step 3. Allocate as much as possible to the lowest cost cell in the row or column with the highest difference. If two or
more differences are equal, allocate as much as possible to the lowest-cost cell in these rows or columns.

Step 4. Stop the process if all row and column requirements are met. If not go to the next step.

Step 5. Recalculate the differences between the two lowest cells remaining in all rows and columns. Any row and
column with zero supply or demand should not be used in calculating further differences. Then go to step 2.

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EXAMPLE
The ICARE Company has three plants located throughout a state with production capacity
50, 75 and 25 gallons. Each day the firm must furnish its four retail shops R1, R2, R3, & R4
with at least 20, 20 , 50, and 60 gallons respectively.

The transportation costs (in Rs.) are given below.

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PHASE 2 – finding the optimal basic solution

Stepping-stone method

Modified Distribution Method

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For stepping stone method,

we will use least cost
method (LCM) as the
starting solution
Phase 2: Optimal Basic Solution

a. Stepping-Stone Method

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 Stepping-Stone Method

The initial solution obtained by the

least cost method had the lowest total
cost of the three initial solutions, we
will use it as the starting solution.

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 Stepping-Stone Method

1. Select any unused square to evaluate

2. Beginning at this square, trace a closed path back to the original square via squares that are
currently being used
3. Begin with adding one unit at the unused corner. Constraints for both row and column should
not be violated. Thus, one should subtract one unit from used square.
4. Calculate an improvement index by first adding the unit-cost figures found in each square
containing a plus sign and subtracting the unit costs in each square containing a minus sign
5. Repeat steps 1 to 4 until you have calculated an improvement index for all unused squares. If
all indices are ≥0, you have reached an optimal solution.
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 Rules for closed path

1. Only right angle turn is allowed

2. Only stepping at stone square is allowed
3. The path may skip over stone square as well as water space
4. Assign (+) and (-) signs alternatively starting (+) sign at unused square (either
clockwise or anti clockwise)
5. Calculate improvement indices. If all values are either positive or zero then our
solution is optimal otherwise chose the most negative valued closed path and
make following improvements.
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 Phase 2: Optimal Basic Solution

B. Modified Stepping-Stone Method

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 Modified Stepping-Stone Method

1. Determine the values of dual variables, ui and vj, using ui + vj = cij

2. Compute the opportunity cost using cij – ( ui + vj ).
3. Check the sign of each opportunity cost. If the opportunity costs of all the unoccupied
cells are either positive or zero, the given solution is the optimal solution. On the other
hand, if one or more unoccupied cell has negative opportunity cost, the given solution is
not an optimal solution and further savings in transportation cost are possible.
4. Select the unoccupied cell with the smallest negative opportunity cost as the cell to be
included in the next solution.

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 Modified Stepping-Stone Method

5. Draw a closed path or loop for the unoccupied cell selected in the previous step. Please note that the right
angle turn in this path is permitted only at occupied cells and at the original unoccupied cell.
6. Assign alternate plus and minus signs at the unoccupied cells on the corner points of the closed path with a
plus sign at the cell being evaluated.
7. Determine the maximum number of units that should be shipped to this unoccupied cell. The smallest
value with a negative position on the closed path 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 closed path marked with
plus signs, and subtract it from those cells marked with minus signs. In this way, an unoccupied cell becomes
an occupied cell.
8. Repeat the whole procedure until an optimal solution is obtained.

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