Assignment on

TRANsSHIPMENT
PROBLEM

Submitted by

MUHAMMAD SALIM
( 07217003909 )
MBA 1ST SEMESTER
TRANSPORTATION MODEL
One important application of linear programming has been in the area of
physical distribution of resources, from one place to another to meet a
specific set of requirements. It is easy to express a transportation problem
mathematically in terms of an LP model, which can be solved by simplex
method. Since transportation problem involves a large number of variables
and constraints it takes a very long time to solve it by the simplex ways,
involving transportation algorithm, namely the stepping stone method,
MODI method have been involved for this purpose. The transportation
algorithm discussed in this chapter is applied to minimize the total cost
of transporting a homogeneous commodity from one plane to another.
However, it can also be applied to the minimization of some total value /
utility, for example, financial resources are distributed in such a way that
the profitable return is maximized.

TRANSPORTATION PROBLEM
The transportation problem applied to situation in which a single product is
to be transported form several sources to several sinks. In general, let
there be m sources, S1, S2,…,Sm having Ai units of supplies or capacity
respectively table transported among n destination D1,D2,…,Dn with Bj
units of requirement respectively. Let Cij be the cost of shipping one unit of
commodity from sources i to destination j for each route. If Xij represents
the units shipped per route from source i to destination j, the problem is to
determine the transportation schedule so as to minimize the total
transportation cost satisfying supply and demand conditions. athematically
the problem can be stated as:
m n
Minimize (total cost) = Σ Σ Cij Xij
i=1 j=1
Subject to the constraints

n
Σ Xij = Ai, i = 1,2,…,m
j=1

m
Σ Xij = Bj, j = 1,2,…,n
i=1
And Xij  0 for all i and j.
 TRANSHIPMENT PROBLEM
In the transportation problem it was assumed that a source (factory, plant,
etc.) acts only as a shipper of the goods and a destination (market etc.)
acts only as receiver of the goods. We shall now consider the broader class
of transportation problem, called as transshipment problem, which allows
for the shipment of goods both from one source to another, and from one
destination point to another. Thus, we allow for the possibility of
transshipment –the goods produced/available at one source and
destination for some destination point may reach there via other sources
and/or destinations and transshipped at these points. This is obviously a
more realistic statement of the distribution problem faced by a
business/industrial house. For example, a multi-plant firm may find it
necessary to send some goods from one plant to another in order to meet
the substantial increase in the demand in the second market. The second
plant here would act both as a source and a destination and there is no real
distinction between source and destination.

A transportation problem can be converted into a transshipment problem by

relaxing the restrictions on the receiving and sending the units on the
origins and destinations respectively. An m-origin, n-destination,
transportation problem, when expressed as transshipment problem, shall
become an enlarged problem: with m + n origins and an equal number of
destinations. With minor modifications, this problem can be solved using
the transportation method.

If we let the sources and destinations in a transshipment problem as T,

then xij would represent the amount of goods shipped from the ith terminal
(Ti) to the jth terminal (Tj), and cij would represent the unit cost of such
shipment. Naturally, xii would equal to zero because no unit would be
shipped from a terminal to itself. Now, assume that at m terminals (T1,T2,
…,Tm), the total outshipment exceeds the total inshipment by amounts
equal to a1, a2,…, am respectively and at the remaining n terminals (Tm+1,
Tm+2,…, Tm+n) the total inshipment exceeds the total outshipment by
amounts b m+1, b m+2,…, b m+n respectively. If the total inshipment at
terminals T1, T2,…, Tm be t1, t2,…, tm respectively and the total outshipment
at the terminals T m+1, T m+2,…,T m+n be t m+1, t m+2,…, t m+n respectively, we
can write the transshipment problem as:

m+n m+n

Minimize Z= Σ Σ cij xij

i=j j=i
Subject to
xi1 + xi2 +…+ xi,i-1+ xi,i+1 +…+ xi,m+n -ti=ai (i=1,2,…,m)
(1)
x1i + x2i +…+ xi-1,i+ xi+1,i +…+ xm+n,I =ti (i=1,2,…,m)
(2)
xij + x2j +…+ xj-1,j+ xj+1,j +…+ xm+n,j -tj=bj (j=m+1,m+2,
…,m+n) (3)
xj1 + xj2 +…+ xj,j-1+ xj,j+1 +…+ xj,m+n =tj (j=m+1,m+2,
…,m+n) (4)

m m+n

Σ ai = Σ bj
(5)

i=1 j=m+1
As can be easily observed, these constraints are similar
to the constraints of a transportation problem with m + n
sources and m + n destinations, with the differences that
here there are no xii and xjj terms, and that bj=0 for j=
1,2,…,m and ai=0 for i=m+1,m+2,…,m+n. The terms ti
and tj in these constraints may be seen as the algebraic
equivalents of xii and xjj . Now, we can view this problem
as an enlarged problem and solve it by using the
transportation method.

The transshipment problem is an extension of the transportation

problem in which the commodity can be transported to a particular
destination through one or more intermediate or transshipment
odes.

Each of these nodes in turn supply to other destinations. The

objective of the transshipment problem is to determine how many
units should be shipped over each node so that all the demand
requirements are met with the minimum transportation cost.
Considering a company with its manufacturing facilities situated at
two places, Coimbatore and Pune. The units produced at each
facility are shipped to either of the company’s warehouse hubs
located at Chennai and Mumbai. The company has its own retail
outlets in Delhi, Hyderabad, Bangalore and Thiruvananthapuram.
The network diagram representing the nodes and transportation
per unit cost is shown in Figure. The supply and demand
requirements are also given.
 Solving Transshipment Problem
 A transportation problem allows only shipments that go directly from
supply points to demand points.
 In many situations, shipments are allowed between supply points or
between demand points.
 Sometimes there may also be points (called transshipment points)
through which goods can be transshipped on their journey from a
supply point to a demand point.
 Fortunately, the optimal solution to a transshipment problem can be
found by solving a transportation problem.
 The following steps describe how the optimal solution to a
transshipment problem can be found by solving a transportation
problem.
 Step 1 If necessary, add a dummy demand point (with a supply of 0
and a demand equal to the problem’s excess supply) to balance the
problem. Shipments to the dummy and from a point to itself will be
zero. Let s= total available supply.
 Step2 Construct a transportation tableau as follows: A row in the
tableau will be needed for each supply point and transshipment point,
and a column will be needed for each demand point and
transshipment point.
 Each supply point will have a supply equal to it’s original supply, and
each demand point will have a demand to its original demand.
 Let s= total available supply.
 Then each transshipment point will have a supply equal to (point’s
original supply)+s and a demand equal to (point’s original demand)
+s.
 This ensures that any transshipment point that is a net supplier will
have a net outflow equal to point’s original supply and a net
demander will have a net inflow equal to point’s original demand.
 Although we don’t know how much will be shipped through each
transshipment point, we can be sure that the total amount will not
exceed s.
The Transshipment Problem: An Example
In a transportation problem, shipments are allowed only between source-
sink pairs. In many applications, this assumption is too strong. For
example, it is often the case that shipments may be allowed between
sources and between sinks. Moreover, there may also exist points through
which units of a product can be transshipped from a source to a sink.
Models with these additional features are called transshipment problems.
Interestingly, it turns out that any given transshipment problem can be
converted easily into an equivalent transportation problem. The availability
of such a conversion procedure significantly broadens the applicability of
our algorithm for solving transportation problems.

We will illustrate the conversion procedure with an example.

A company manufactures a product in two cities, which are Dallas and
Houston. The daily production capacities at Dallas and Houston are 160
and 200, respectively. Products are shipped by air to customers in San
Francisco and New York. The customers in each city require 140 units of
the product per day. Because of the deregulation of air fares, the company
believes that it may be cheaper to first fly some products to Chicago or Los
Angeles and then fly the products to their final destinations. The costs of
flying one unit of the product between these cities are shown in the table
below.

The company wants to minimize the total cost of daily shipments of the
required products to its customers.
We shall first define our terminology more carefully. We will define a source
as a city that can send products to another city but cannot receive any
product from any other city. Similarly, a sink is defined as a city that can
receive products from other cities but cannot send products to any other
city. Finally, a transshipment point is defined as a city that can both receive
products from other cities and send products to other cities.
According to these definitions, Dallas and Houston are sources, with (daily)
supplies of 160 and 200 units respectively. Chicago and Los Angeles are
transshipment points. San Francisco and New York are sinks, each with a
(daily) demand of 140 units.

Observe that the total supply equals 360 and the total demand equals 280.
Therefore, we should create a dummy sink, with a demand of 80, to
balance the two. With this revision, we have a problem with 2 sources, 3
sinks, and 2 transshipment points.

Since each transshipment point can both receive and send out products, it
plays the dual roles of being a sink and a source. This naturally suggests
that we could attempt a reformulation in which each transshipment point is
“split” into a corresponding sink and a corresponding source. A little bit of
reflection, however, leads us to the realization that while the demand and
the supply at such a pair of sink and source should be set at the same level
(since there is no gain or loss in units), it is not clear what that level should
be. This is a consequence of the fact that we do not know a priori how
many units will be sent into and hence shipped out of a transshipment
point. Fortunately, upon further reflection, it turns out that this difficulty can
actually be circumvented by assigning a “sufficiently-high” value as the
demand and the supply for such a sink-source pair and by allowing
fictitious shipments from a given transshipment point back to itself at zero
cost.

More specifically, suppose the common value of the demand and the
supply at the corresponding sink and source of a given transshipment point
is set to c; and suppose x units of “real” shipments are sent into and
shipped out of that transshipment point. Then, under the assumption that c
is no less than x, we can interpret this as saying: (i) a total of c units of the
product are being sent into the corresponding sink, of which x units are
sent from other points (or cities) and c − x units are sent (fictitiously) from
the transshipment point to itself; and (ii) a total of c units of the product are
being shipped out of the corresponding source, of which x units are
shipped to other points (or cities) and c − x units are shipped (fictitiously)
back to the transshipment point itself.

Notice that since a shipment from a transshipment point back to itself is

assumed to incur no cost, the proposed reformulation preserves the
original objective function.
The only remaining question now is: What specific value should be
assigned to c? The default answer to this question is to let c equal to the
total supply in the original problem. Such a choice is clearly sufficient
because no shipment can exceed the total available supply. It follows that
we have indeed resolved the difficulty alluded to earlier.

In our problem, there are two transshipment points. Therefore, we should

replace these by two new sources and two new sinks (all of which will
retain their original city names). Furthermore, the new sources and sinks
should have a common supply or demand of 360. Our reformulation,
therefore, yields an equivalent transportation problem with 4 sources and 5
sinks. This equivalent transportation problem is given in the tableau below.

Since the solution method for transportation problems has been explained
in detail, we will not attempt to solve this problem.

An interesting variation of the above example is to allow shipments

between Dallas and Houston, say, at a cost of $5 per unit either way. This
would make Dallas and Houston transshipment points. It follows that we
should introduce into the above tableau two new sinks to represent Dallas
and Houston, respectively. Both of these two new sinks should have a
demand of 360. Correspondingly, it will also be necessary to increase the
supply from Dallas by 360, to 520, and the supply from Houston by 360, to
560. These revisions result in the formulation below.
Notice that we have introduced 4 “big” M’s as the transportation costs in
four cells. These are intended to insure that shipments into Dallas and
Houston from other cities do not appear in the optimal solution.

It’s clear that other variations can also be handled similarly.