Transportation, Transshipment and Assignment Problems

Transportation, Transshipment
and Assignment Problems

Sessions 5 & 6
Decision Models in Management
MNG 617
Prof. Pankaj Dutta
SJMSOM, IITBombay
Copyright@sjmsomiitbombay2016
Transportation Problems
The Transportation Problem
The Transportation Problem Many of its application involve

determining how to optimally transport goods, optimal
production scheduling, etc.
The general transportation problem is concerned with

distributing any commodity from any group of supply centers,
called sources, to any group of receiving centers, called
destinations, in such a way as to minimize the total distribution
cost.
Procter & Gamble (P &G) - An application Vignette
P &G makes and markets over 300 brands of consumer goods worldwide.
To maintain and accelerate its growth, a major OR study was undertaken
to strengthen P&Gs global effectiveness. Prior to the study, the companys
supply chain consisted of hundred of suppliers, over 50 product categories,
over 60 plants, 15 distribution centers, and over 1000 customers zones.
However, as the company moved toward global brands, management
realized that it needed to consolidate plants to reduce manufacturing
expanses, improve speed market, and reduce capital investment.
Therefore, the study focused on redesigning the companys production and
distribution system for its North American Operations. The result was a
reduction in the number of North American Plants by almost 20 percent,
savings $200 million in pretax cost per year.
A major part of the study revolved around formulating and solving
transportation problems for individual product categories. For each option
regarding the plants to keep open, and so forth, solving the corresponding
transportation problem for a product category showed what the distribution
cost would be for shipping the product category from those plants to the
distribution centers and customer zones. Sources: Interfaces, vol. 27, 1997.
CASE: SHIPPING WOOD TO MARKET

Alabama Atlantic is a lumber company that has three sources of wood and five markets
to be supplied. The annual availability of wood at sources 1, 2, and 3 is 15, 20, and 15
million board feet, respectively. The amount that can be sold annually at markets 1, 2,
3, 4, and 5 is 11, 12, 9, 10, and 8 million board feet, respectively.
In the past the company has shipped the wood by train. However, because shipping
costs have been increasing, the alternative of using ships to make some of the
deliveries is being investigated. This alternative would require the company to invest in
some ships. Except for these investment costs, the shipping costs in thousands of
dollars per million board feet by rail and by water (when feasible) would be the following
for each route:
Source
s
1
2
3
Unit Cost by Ship ($1,000s)

Market
Unit Cost by Rail

($1,000s) Market
1
61
69
59
72
78
66
45
60
63
55
49
61
66
56
47
31
36
38
43
33
24
28
36
24
32
35
31
26

The capital investment (in thousands of dollars) in ships required for each million board
feet to be transported annually by ship along each route is given as follows:
Sources
1
2
3
Investment for Ships ($1,000s) Market

1
275
293
303
318
283
238
270
275
250
268
285
265
240
Considering the expected useful life of the ships and the time value of money, the
equivalent uniform annual cost of these investments is one-tenth the amount given in the
table. The objective is to determine the overall shipping plan that minimizes the total
equivalent uniform annual cost (including shipping costs).

You are the head of the OR team that has been assigned the task of
determining this shipping plan for each of the following three options.
Option 1: Continue shipping exclusively by rail.
Option 2: Switch to shipping exclusively by water (except where only rail is
feasible).
Option 3: Ship by either rail or water, depending on which is less
expensive for the particular route.
Present your results for each option. Compare.

Finally, consider the fact that these results are based on current shipping
and investment costs, so that the decision on the option to adopt now
should take into account managements projection of how these costs are
likely to change in the future. For each option, describe a scenario of future
cost changes that would justify adopting that option now.
The requirements assumption
Each source has a fixed supply of units, where this entire

supply must be distributed to the destinations.
si: no. of units being supplied by source i, i= 1,2,,m.
Each destination has a fixed demand for units, where this

entire demand must be received from the sources.
dj: no. of units being received by destination j, j= 1,2,,n.
The cost assumption
The cost of distributing units from any particular source to any

particular destination is directly proportional to the number of
units distributed.
Cij: unit cost for source i and destination j.
The feasible solution property
A transportation problem will have feasible solutions if and

only if
Integer solution property
For transportation problems where every si and dj have an

integer value, all the basic variables (allocations) in every basic
feasible solution also have integer values.
Z: The total distribution cost

xij: The number of units to be distributed from source i to
destination j
10
The
table of constraint coefficient has the following

special structure
As
S d
, the number of basic variables in any

iteration of a transportation problem is m+n-1.
i 1
j 1
11
Example P & T COMPANY
One of the main products of the P & T COMPANY is canned peas.

The peas are prepared at three canneries (near Bellingham,
Washington; Eugene, Oregon; and Albert Lea, Minnesota) and then
shipped by truck to four distributing warehouses in the western
United States (Sacramento, California; Salt Lake City, Utah; Rapid
city, South Dakota; and Albuquerque, New Mexico).
Because shipping cost are a major expense, management is initiating
a study to reduce them as much as possible. For the upcoming
season, an estimate has been made of the output from each cannery,
and each warehouse has been allocated a certain amount from the
total supply of peas. This information (in units of truckloads), along
with the shipping cost per truckload for each cannery-warehouse
combination is given in Table 1. Thus, there are a total of 300
truckloads to be shipped.
12
P &T Co. (Continued)
13
P &T Co. (Continued)

Table -1 : Shipping data for P & T Co.
Shipping Cost ($) per Truckload
Warehouse
1
2
3
4
Output
1
464
513
654
867
75
Cannery 2
352
416
690
791
125
3
995
682
388
685
100
Allocation
80
65
70
85
The problem now is to determine which plan for assigning

these shipments to various cannery-warehouse combinations
would minimize the total shipping cost.
14
LP Formulation: P & T COMPANY

xij: number of units of truckloads to be transport from cannery i
to warehouse j
Min Z = 464x11+ 513x12+654x13+ 867x14
+ 352x21+ 416x22+ 690x23+ 791x24
+ 995x31+ 682x32+ 388x33+ 685x34
Subject to:
x11+x12+x13+x14
x21+x22+x23+x24
X11
x12
+x21
+x22
x13
+x23
x14
+x24
Xij > 0 ( i = 1,2,3; j = 1,2,3,4)
x31+x32+x33+x34
+x31
+x32
+x33
+x34
= 75
= 125
= 100
= 80
= 65
= 70
= 85
15
Example P & T COMPANY

Solution P & T
COMPANY
constraints
x11 x12 x13 x14 x21 x22 x23 x24 x31 x32 x33 x34
1
1
1
1
75 =
75
1
1
1
1
125 = 125
1
1
1
1 100 = 100
1
1
1
80 =
80
1
1
1
65 =
65
1
1
1
70 =
70
1
1
1 85 =
85
Objective 464 513 654 867 352 416 690 791 995 682 388 685
Min 152535
Solution
20
55
80
45
70
30
16
Example-2
A power company has three electric power plants that

supply the needs of four cities. Each power plant can
supply the following numbers of kilowatt-hours of
electricity:
Plant
Plant
Plant
1 35 million;
2 50 million;
3 40 million.
The demands in these cities are as follows:

City
City
1 45 million;
2 20 million;
City 3 30 million;
City 4 30 million.
17
Example 2
The costs (in 00 Rs) of sending 1 million kwh of

electricity from plant to city depend on the distance the
electricity must travel and is given below
Formulate an LP to minimize the cost of meeting each

citys power demand.
18
L P Formulation
xij: number of (million) kwh produced at plant i and sent to
city j
Min Z = 8x11+ 6x12+10x13+ 9x14
+ 9x21+ 12x22+ 13x23+ 7x24
+ 14x31+ 9x32+ 16 x33+ 5x34
Subject to:
x11+x12+x13+x14 = 35
x21+x22+x23+x24 = 50
x31+x32+x33+x34 = 40
x11+x21+x31 = 45
x12+x22+x32 = 20
x13+x23+x33 = 30
x14+x24+x34 = 30
Xij > 0 i = 1,2,3 j = 1,2,3,4
19
Example 2
Solution: Example 2
constraints
x11 x12 x13 x14 x21 x22 x23 x24 x31 x32 x33 x34
1
1
1
1
35
1
1
1
1
50
1
1
1
1 40
1
1
1
45
1
1
1
20
1
1
1
30
1
1
1 30
Objective
function
10
12
13
14
16
Solution
10
25
45
10
30
=
=
=
=
=
=
=
35
50
40
45
20
30
30
Min 1020
20
Facility Location Analysis

The transportation method is especially useful in helping a
firm to decide where to locate a new factory or warehouse.

Each alternative location should be analyzed within the
framework of one overall distribution system.

The new location that yields the minimum cost for the
entire system is the one that should be chosen
21
Locating a New Factory for Hardgrave

Machine Company
Hardgrave Machine produces computer components at
three plants and they ship to four warehouses

The plants have not been able to keep up with demand so
the firm wants to build a new plant

Two sites are being considered, Seattle and Birmingham
Data has been collected for each possible location
Which new location will yield the lowest cost for the firm
in combination with the existing plants and warehouses
22

Machine Company
Hardgraves demand and supply data
WAREHOUSE
MONTHLY
DEMAND
(UNITS)
PRODUCTION
PLANT
MONTHLY
SUPPLY
COST TO PRODUCE
ONE UNIT ($)
Detroit
10,000
Cincinnati
15,000
48
Dallas
12,000
Salt Lake
6,000
50
New York
15,000
Pittsburgh
14,000
52
Los Angeles
9,000
35,000
46,000
Supply needed from new plant = 46,000 35,000 = 11,000 units per month
ESTIMATED PRODUCTION COST

PER UNIT AT PROPOSED PLANTS
Seattle
$53
Birmingham
$49
23

Machine Company
Hardgraves shipping costs
TO
FROM
LOS
ANGELES
DETROIT
DALLAS
NEW YORK
CINCINNATI
$25
$55
$40
$60
SALT LAKE
35
30
50
40
PITTSBURGH
36
45
26
66
SEATTLE
60
38
65
27
BIRMINGHAM
35
30
41
50
24

Machine Company
Optimal solution for the Birmingham location
TO
FROM
CINCINNATI
DETROIT
10,000
103
1,000
88
PITTSBURGH
84
BIRMINGHAM
WAREHOUSE
REQUIREMENT
73
85
SALT LAKE
DALLAS
10,000
12,000
88
1,000
80
97
11,000
NEW YORK
100
14,000
79
15,000
LOS
ANGELES
4,000
108
90
5,000
78
118
90
99
9,000
FACTORY
CAPACITY
15,000
6,000
14,000
11,000
46,000
25

Machine Company
Excel input screen
26

Machine Company
Output from Excel QM analysis
27

Machine Company
Optimal solution for the Seattle location
TO
FROM
CINCINNATI
DETROIT
10,000
73
4,000
85
SALT LAKE
103
6,000
88
PITTSBURGH
10,000
2,000
12,000
NEW YORK
91
88
108
100
90
78
118
1,000
80
97
113
SEATTLE
WAREHOUSE
REQUIREMENT
DALLAS
LOS
ANGELES
14,000
118
15,000
9,000
9,000
80
FACTORY
CAPACITY
15,000
6,000
14,000
11,000
46,000
28

Machine Company
By comparing the total system costs of the two
alternatives, Hardgrave can select the lowest cost option

The Birmingham location yields a total system cost of
$3,741,000
The Seattle location yields a total system cost of
$3,704,000
With the lower total system cost, the Seattle location is
favored
29
Transportation model can be applied to production

scheduling and inventory control problems. How?
Consider the case of a manufacturer whose product has a seasonal
demand
To meet the demand, the production plan of the manufacturer could be:
Completely uniform production
Variable production, completely matching the demand
Something between the two
Hence, optimal production plan requires a trade-off between overtime costs
and inventory holding cost
Mapping to a Transportation Problem:
Regular and overtime production capacity as origins
Demand as destinations
Total cost is (Production cost + inventory cost)
Decision variables-production quantities manufactured by a particular
method, namely regular or overtime for meeting the demand
30
A manufacturer of a certain component has the following estimates of

the demand for its product:
Period
Demand
50
70
85
75
The regular production capacity for each period is 60 units while with overtime
working, an additional of upto 20 units can be produced in each period. The
unit cost of production in regular time is worked out to be Rs 6 whereas it
would cost Rs 10 per unit for the items manufactured during overtime. You
may assume that the cost would be identical in all the periods. Any production
in excess of the requirement in the current period may be held at a cost of Rs
3 per unit per period. No holding cost is involved if a unit is sold in the period
in which it is produced.
(a) Formulate the problem as a transportation problem; and
(b) Draw the optimal production plan for the manufacturer
31
Production planning problem as transportation problem
Origin
Destination
Supply
R1
12
15
60
O1
10
13
16
19
20
R2
12
60
O2
10
13
16
20
R3
60
O3
10
13
20
R4
60
O4
10
20
Demand
50
70
85
75
40
320
R: Regular Time, O: Overtime, D: Dummy

32
Solution: Optimal
Origin
Destination
Supply
R1
6 (50)
9 (10)
12
15
60
O1
10
13
16
19
0 (20)
20
R2
6 (60)
12
60
O2
10
13 (5)
16
0 (15)
20
R3
6 (60)
60
O3
10 (20)
13
20
R4
6 (60)
60
O4
10 (15)
0 (5)
20
Demand
50
70
85
75
40
320
R: Regular Time, O: Overtime, D: Dummy

33
Solution: Production Scheduling

Produce in Month Units
1
R
O.T.
60
nil
R
O.T.
60
5
R
O.T.
60
20
R
O.T.
60
15
Demand
For use in Month

1
50
10
60
5
60
20
60
15
50
70
85
75
R: Regular Time, O: Overtime
34
Northern Airplane (Production Scheduling)

Northern Airplane Company produces commercial airplanes. The last stage in production
is to produce the jet engines and install them. The company must meet the delivery
deadline indicated in column 2. An option is to produce some engines one month or more
before they are scheduled for installation and store them. Production and storage costs
vary from month to month.
Maximum
Production
Unit Cost of
Production ($million)
Unit Cost
of Storage(*)
($thousand)
Month
Scheduled
Installations
10
25
1.08
15
15
35
1.11
15
25
30
1.10
15
20
10
1.13
Question: How many engines should be produced in each of the four months so that
the total of the production and storage costs will be minimized?
(*) storage cost is incurred at the end of the month for just those engines that are being held over to
35
the next month;

Source i - production of jet engines in month i (i = 1,2 ,3 4);
Destination j installation of jet engines in month j (j = 1,2 ,3 4)
xij = number of engines produce in month i to be installed in
month j
cij = cost associated with each unit of xij
Cost per unit for production + storage
if i < j
if i >j
???
si = ??
dj = number of scheduled installations in month j
36

Cost per unit distributed
Destinations
(installation
in month j)
Source
(production
in month i)
SUPLLY
1.080
1.095
1.110
1.125
1.110
1.125
1.140
1.100
1.115
1.130
Demand
10
15
25
30
Question: How many engines should be produced in each of the four months so
that the total of the production and storage costs will be minimized?
(*) storage cost is incurred at the end of the month for just those engines that are being held over to
37
the next month;
Transportation Tableau: Cost per unit distributed

Destinations
(installation
in month j)
Source
(production
in month i)
1.080
1.095
1.110
1.125
25
1.110
1.125
1.140
35
1.100
1.115
30
1.130
10
Demand
10
15
25
20
30
5(D)
(*) SUPLLY
(*) The dummy destination can be seen as a slack variable that represents the
unused production capacity. Cost is zero because it is the cost of distributing to a
fictional destination. Note that it would be inappropriate to assign M since we do
not want to force the corresponding values to be zero. In fact these values need
to sum 30.
38
- Alternative Solution Approaches
Initial basic feasible Solution by North West Corner

Method
Initial basic feasible Solution by Vogels Approximation

Method (VAM)
The Transportation Simplex method
39
Example
SunRay Transport ships truckloads of grain from three silos

to four mills. The supply (in truckloads) and the demand
(also in truckloads) together with the unit transportation
costs per truckload on the different routes are summarized in
the transportation model in Table-2.
The unit transportation costs, cij, (shown in the northeast
corner of each box) are in hundreds of dollars. The model
seeks the minimum-cost shipping schedule xij between silo i
and mill j (i=1,2,3; j=1,2,3,4)
40
Example
Table: Sunray Transportation Model.
Mill
2
10
3
2
4
20
Supply
11
15
x11
x12
x13
12
Silo
x14
20
25
x21
x22
x23
x24
14
16
18
10
x31
Demand
x32
5
x33
15
x34
15
15
41
Initial basic feasible Solution by

North West Corner Method
The method starts at the northwest-corner cell (route) of the tableau

(variable x11).
Step-1: Allocate as much as possible to the selected cell, and adjust
the associated amounts of supply and demand by subtracting the
allocated amount.
Step-2: Cross out the row or column with zero supply or demand to
indicate that no further assignments can be made in that row or
column. If both a row and a column net to zero simultaneously,
cross out one only, and leave a zero supply (demand) in the
uncrossed-out row (column).
Step-3: If exactly one row or column is left uncrossed out, stop.

Otherwise, move to the cell to the right if a column has just been
crossed out or below if a row has been crossed out. Go to Sep 1.
42
Example 3(North West Corner method)

Table-3: NorthWest Corner IBF Solution
Mill
2
10
4
20
11
15
7
5
4
9
15
14
20
5
16
3
Demand
15
15
25
18
10
5
Supply
10
12
Silo
10
15
43

Vogels Approximation Method (VAM)
VAM is an improved version of the least-cost method that generally,

but not always, produces better starting solutions.
Step-1: For each row (column), determine a penalty measure by

subtracting the smallest unit cost element in the row (column) from
the next smallest unit cost element in the same row (column).
Step-2: Identify the row or column with the largest penalty. Break
ties arbitrarily. Allocate as much as possible to the variable with the
least unit cost in the selected row or column. Adjust the supply and
demand, and cross out the satisfied row or column. If a row and a
column are satisfied simultaneously, only one of the two is crossed
out, and the remaining row (column) is assigned zero supply
(demand).
44

Vogels Approximation Method (VAM)
Step-3:
(a) If exactly one row or column with zero supply or demand

remains un-crossed out, stop.
(b) If one row (column) with positive supply (demand)
remains uncrossed out, determine the basic variables in the
row (column) by the least-cost method. Stop.
(c) If all the uncrossed out rows and columns have
(remaining) zero supply and demand, determine the zero
basic variables by the least-cost method. Stop.
(d) Otherwise, go to step-1.
45
Example 3: (Vogels Approx. Method)

Table: IBF Solution Vogel's Approximation Method(VAM)
Mill
2
10
Colmn
Penalty
14
20
10
16
5
15
6
----
15
5
5
---
2 11 20
25, 10
18
5
I
II
III
IV
11
9
15
Demand
20
Supply
15
15
12
Silo
Row Penalty
I II III IV
8 9 -- --
10 2
2 18
10, 5
15, 5
7
7
7
--
7
7
2
2
46
Example 4
Demand
D1
D2
D3
D4
Supply
O1
30
O2
50
O3
20
20
40
30
10
47
Example 4
D1
D2
D3
D4
Supply Row Penalty

0
O1
30
10
O2
50
2
O3
Demand
Colum n Penalty
20
40
30
10
20
48
Example 4
D1
O1
D2
D3
D4
Supply Row Penalty
Demand
Colum n Penalty
20
40
30
10
0 20
50 40
20
O3
30
10
O2
20
3
--
49
Example 4
D1
D2
D3
D4
Supply Row Penalty
20
O1
0
1
1
1
Demand
Colum n Penalty
20
40
30
10
2 20
0 20
1 30
--
--
--
50 40
20
O3
30 30
10
O2
20
50
Example 4
D1
D2
20
O1
D3
D4
Supply Row Penalty
10
1
0
1
1
1
Demand
Colum n Penalty
--
20
40
30
10
0 20
--
--
1 20
--
--
--
50 40
20
O3
30 10
10
O2
20
51
Example 4
D1
D2
20
O1
D4
Supply Row Penalty
10
1
2
20
O2
D3
0
1
20
3
1
1
Demand
Colum n Penalty
--
20
40
30
10
0 20
--
--
1 20
--
--
--
50 40
20
O3
30 10
10
2
20
52
Step 1: Construct an initial basic feasible solution by North

West corner rule or by Vogels approximation method.
Step 2: Derive ui and vj.

A convenient way to derive is by selecting the row having the
largest number of allocations, setting its ui= 0 and then solving
the set of equations cij= ui+ vj for each (i,j) such that xij is
basic.
Calculate ij = cijuivj corresponding to the unoccupied
cell (i, j).
If ij = cijuivj 0 for every (i, j) such that xij is non
then the current solution is optimal, so stop.
basic,
Otherwise, go to the next step.

53
Step 3:
Determine the entering basic variable:
Select the nonbasic variable xij having the largest negative
value of cijuivj.
Determine the leaving basic variable:
Identify the chain reaction required to retain feasibility
when the entering basic variable is increased. From the
donor cells, select the basic variable having the smallest
value.
Determine the new basic feasible solution.
Add the value of the leaving basic variable to the allocation
for each recipient cell. Subtract this value from the
allocation for each donor cell.
Go to step 2.
54
Interpretation
ui: Multiple of original row i that has been subtracted from

original row 0 by the simplex method during all iterations
leading to the current simplex table.
vj: Multiple of original row m+j that has been subtracted from
original row 0 by the simplex method during all iterations
leading to the current simplex table.
ui and vj can be interpreted as dual variables. For a non basic

variable, cijuivj denotes the rate at which Z will change as xij
is increased. For any transportation problem with m sources
and n destinations, the number of functional constraints is m+n
but the number of basic variables is m+n-1.
55
Example 5
Demand
D1
D2
D3
O1
O2
O3
O4
14
18
Supply
56
Example 5 (Check all ij > 0 for optimality)

D1
D2
D3
Supply
-1
-2
14
ui
5
O1
8
O2
3
7
O3
5
2
O4
Demand
vj
10
18
57
Example 5 (Check all ij > 0 for optimality)

D1
5
O1
D2
0
Supply ui
2
3
D3
-1
-2
14
-2
8
O2
7
7
O3
5
2
O4
Demand
vj
4
2
10
18
58
Example 5
D1
5
O1
0
2
3
O2
Supply
14
Demand
O3
D3
1
O4
D2
7
4
12
18
59
The Transportation problem always has a feasible

solution.
The solution of the transportation problem is never
unbounded.
Degeneracy: If the no. of occupied cell is not equals to m+n-1, then
add a small positive quantity to a cell (may be more than one required
to reach m+n-1) such that this does not result in forming a loop among
some or all of the occupied cells and make them dependent. For a
dependent set of cells unique determination of ui and vj will not be
possible.
Now, do the optimality test as it is. If one ij is negative, then add to
this cell, because it is the most minimum among the concerned loop.
Do the optimality test again.
60
Example 6 (For your information)
Demand
D1
D2
D3
O1
60
O2
70
O3
11
80
50
80
80
Supply
61
Maximization Transportation Problem:

A transportation tableau may contain unit profits instead of unit costs. Select
the largest element from the profit matrix and subtract all element from it.
Now we can find the solution for the minimization problems. Once this is
done, the value of the objective function is determined with reference to the
original profit matrix.
Unbalanced Transportation Problems:

Add a column/row of slack variables with dummy source/destination
representing the requirement equal to the amount of excess demand/supply
with zero transportation cost.
Unacceptable or Prohibited Routes:

Sometimes in a given transportation problem some route(s) may not be
available. Assign a large cost in that cell.
Unique or Multiple Optimal Solutions:

If some cell( or cells) has ij =0, then multiple optimal solutions are
indicated so that there exit other transportation pattern(s) with same cost.
62
Schematic presentation of transportation method

Start
Write the problem in tabular form
No
Is it
balanced?
Balance the table using

dummy row/column
Yes
Is it a
maximization
problem?
Yes
Convert it into a maximization problem:

subtract each element of the profit
matrix from its highest value
No
Find its initial basic feasible solution
using NWC rule, VAM etc.
Is it a
degenerate?
Yes
Estimate degeneracy by assigning

to requisite number of cells
No
Generate an improved solution
No
Is it a
optimal?
Yes
The problem is solved
Stop
63
Transshipment Problems
64
The transshipment model recognizes that it
may be cheaper to ship through intermediate or
transient nodes before reaching the final
destination.
Transshipment model can be converted to a
regular transportation model using the idea of
a buffer.
65
Pure supply nodes

Transshipment nodes
Pure demand nodes
Supply at a pure supply node = Original supply
Demand at a pure demand node = Original demand
Supply at a transshipment nodes = Original supply + Buffer
amount
Demand at a transshipment nodes = Original demand + Buffer
amount
The buffer amount should be sufficient enough to allow all the
original supply (or demand) units to pass through any of the
transshipment nodes.
66
The Transshipment Model Characteristics

Extension of the transportation model.
Intermediate transshipment points are added between the sources and
destinations.
Items may be transported from:

Sources through transshipment points to destinations
One source to another
One transshipment point to another

One destination to another
Directly from sources to destinations
Some combination of these
67
Transshipment Model Example

Problem Definition and Data
Wheat is harvested at firms in Nebrasca and Colorado before being shipped to
the three grain elevators in Kansas city, Omaha and Des Moines, which are
now transshipment points. The amount of wheat harvested at each firm is 300
tons. The wheat is then shipped to the mills in Chicago, St. Louis, and
Cincinnati. The shipping cost are given in the following table and on the network
graph.
Extension of the transportation model in which intermediate transshipment

points are added between sources and destinations.
Data:
Farm
1. Nebrasca
2. Colorado
3. Kansas City
$16
15
Grain Elevator
4. Omaha
10
14
5. Des Moines
12
17
68
68

Problem Definition and Data
Network of Transshipment Routes

69

Model Formulation
Minimize Z = 16x13 + 10x14 + 12x15 + 15x23 + 14x24 + 17x25 + 6x36 + 8x37 + 10x38
+ 7x46 + 11x47 + 11x48 + 4x56 + 5x57 + x58
subject to:
x13 + x14 + x15 = 300
x23+ x24 + x25 = 300
x36 + x46 + x56 = 200
x37 + x47 + x57 = 100
x38 + x48 + x58 = 300
x13 + x23 - x36 - x37 - x38 = 0
x14 + x24 - x46 - x47 - x48 = 0
x15 + x25 - x56 - x57 - x58 = 0
xij 0
70
70
Computer Solution with Excel
71

Computer Solution with Excel
72

Transshipment Network Solution for Wheat Shipping
73
Distributing Goods through a Distribution Network
74
The Problem. The Distribution Unlimited Co. will be producing the same new
product at two different factories, and then the product must be shipped to two
warehouses, where either factory can supply either warehouse. The distribution
network available for shipping this product is shown in DN Fig. , where F1 and F2
to are the two factories, W1 and W2 are the two warehouses, DC is a distribution
center. The amounts to be shipped from F1 and F2 are shown to their left, and the
amounts to be received at W1and W2 are shown to their right. Each arrow
represents a feasible shipping lane. Thus, F1can ship directly to W1 and has three
possible routes (F1->DC-> W2, F1->F2->DC->W2, and F1->W1->W2) for
shipping toW2. Factory F2 has just one route to W2 (F2->DC->W2) and one to W1
(F2->DC->W2->W1).The cost per unit shipped through each shipping lane is
shown next to the arrow. Also shown next to F1->F2 and DC->W2 are the
maximum amounts that can be shipped through these lanes. The other lanes have
sufficient shipping capacity to handle everything these factories can send.
The decision to be made concerns how much to ship through each shipping lane.
The objective is to minimize the total shipping cost.
The decision to be made concerns how much to ship through each shipping
lane. The objective is to minimize the total shipping cost.
75

With seven shipping lanes, we need seven decision variables (XF1-F2 ,XF1-DC
,XF1-W1 ,XF2-DC ,XDC-W2 ,XW1-W2 ,XW2-W1) to represent the amounts shipped
through the respective lanes.
Minimize Z = 2XF1-F2 + 4XF1-DC + 9XF1-W1 + 3XF2-DC +XDC-W2 +3XW1-W2

+2XW2-W1
Subject to;
5-Net flow constrains
Upper bound constraints
Amount shipped out - amount shipped in = required amount

XF1-F2 <= 10, XDC-W2 <= 80
Non-negativity constraints
76
Formulation as a Linear Programming Problem

Minimize Z = 2XF1-F2 +4XF1-DC +9XF1-W1 + 3XF2-DC + XDC-W2 +3XW1-W2 +2XW2-W1
subject to the following constraints:
1. Net flow constraints:
XF1-F2 + XF1-DC + XF1-W1
- XF1-F2
= 50 (factory 1)
+ XF2-DC
- XF1-DC
= 40 (factory 2)
- XF2-DC + XDC-W2
- XF1-W1
= 0 (distribution center)
+ XW1-W2 - XW2-W1 = -30
(warehouse 1)
- XDC-W2 - XW1-W2 + XW2-W1 = -60

(warehouse 2)
2. Upper-bound constraints: XF1-F2 <=10, XDC-W2 <=80
3. Non-negativity constraints:
XF1-F2 >=0, XF1-DC >=0, XF1-W1 >=0, XF2-DC >=0,
XDC-W2 >=0, XW1-W2 >=0, XW2-W1 >=0
77
Solution:
XF1-F2 =0, XF1-DC =40,
XF1-W1 =10, XF2-DC =40,

XDC-W2 =80, XW1-W2 =0,
XW2-W1 =20
The resulting total shipping cost is $49,000.
78
Test Problem
Two automobile plants, P1 and P2, are linked to three
dealers, D1, D2, and D3, by way of two transit centers, T1
and T2m according to network shown in the following SC
network. The supply amounts at plants P1 and P2 are 1000
and 1200 cars, and the demand at dealers D1, D2 and D3 are
800,900 and 500 cars. The shipping costs per car in hundreds
of dollars between pairs of nodes are shown on connecting
links (or arcs) of the network.
Develop a corresponding transshipment model.
79
Test Problem
800
D1
8
3
1000
T1
P1
6
4
7
900
D2
2
1200
P2
3
T2
D3
500
Fig. Supply Chain Network
80
Assignment Problems
81
American League Umpires

Scheduling umpires in professionals baseball is a complex problem that must include a
number of criteria. In assigning officials to games, one objective typically is to minimize total
travel cost while satisfying a set of frequency-oriented constraints such as limiting the
number of times an official or crew is exposed to each team, balancing home and away
game exposures, balancing exposures to teams over the course of a season, and so on.
These constraints complicate the problem to such an extent that except for the most trivial
cases, the use of a computer-based system is essential.
The American League is composed of 14 professional baseball teams organized into three
divisions. The game schedule, constructed each winter prior to the start of the baseball
season, is a different scheduling problem in itself. Consideration must be given to such
factors as the number of games played against other teams, both within and outside a
division, the split between home games and road trips, travel time, and possible conflicts in
cities that have teams in the National League.
The objective of balancing crew assignments relatively evenly and minimizing travel costs
are by nature conflicting, Attempting to balance crew assignments necessitates considerable
airline travel and equipment moves, and hence increased travel costs.
Using an assignment model as part of a micro computer-based decision support system, the
American League was able to reduce travel mileage by about 4% during the first year of use.
This not only saved the league $30, 000 but improved the crew exposure balance.
Source: Interface, 1988
82
Examples
Assigning airline crews to flights in order to minimize costs.
Assigning sales personnel to sales districts in order to

maximize sales.
Assigning rescue units to rescue tasks in order to minimize

total combined time to complete all rescue tasks.
Assigning boats or planes to charter trips in order to

maximize total profit.
Assigning social workers to welfare cases in order to

maximize the number of cases closed within a specified
period.
83
The Assignment Problem
The assignment problem is a special type of linear

programming problem where assignees are being
assigned to perform tasks.
Assumptions:
- The number of assignees and the number of tasks are the
same.
- Each assignee is to be assigned to exactly one task.
-
Each task is to be performed by exactly one assignee.
There is a cost cij associated with assignee i (i = 1,2,,n)

performing task j (j = 1,2,,n).
- The objective is to determine how all n assignments should

be made to minimize the total cost.
84
Assignment Problem
85
Assignment as a transportation Problem
A resource must be allocated totally or uniquely to a given

task.
Assignment problem is a special type of transportation
problem where the sources are assignees & the destinations
are tasks and where:
No. of sources (m) = No. of destinations (n)
Every Supply si= 1
Every Demand dj=1
86
Job Assignment
A Production supervisor is considering how he should assign the four jobs
that are to be performed, to four of the workers. He wants to assign the
jobs to the workers such that the aggregate time to perform the jobs is the
least. Based on previous experience, he has the information on the time
taken by the four workers in performing these jobs, as given in the table
below:
Worker
Job
A
45
40
51
67
57
42
63
55
49
52
48
64
41
45
60
55
87
L P Formulation: Job Assignment

xij: 1 or 0 if the worker is assigned to the job or not
Min Z = 45x11+40x12+51x13+ 67x14
+ 57x21+ 42x22+ 63x23+ 55x24
+ 49x31+52x32+ 48 x33+ 64x34
+ 41x41+45x42+ 60 x43+ 55x44
Subject to
x11+x12+x13+x14 = 1
x21+x22+x23+x24 = 1
x31+x32+x33+x34 = 1
X41+x42+ x43+ x44 = 1
x11+x21+x31 +X41= 1
x12+x22+x32 +x42= 1
x13+x23+x33 + x43 = 1
x14+x24+x34 + x44 = 1
Xij ={0,1}, i = 1,2,3,4 j = 1,2,3,4
88
88
Job Assignment
Solution
Constraints
x11 x12 x13 x14 x21 x22 x23 x24 x31 x32 x33 x34 x41 x42 x43 x44
1 1 1 1
1
1 1 1 1
1
1 1 1 1
1
1 1 1 1 1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1 1
Objective
45 40 51 67 57 42 63 55 49 52 48 64 41 45 60 55
Solution
=
=
=
=
=
=
=
=
1
1
1
1
1
1
1
1
Min 184
89
Basic Principle
The optimal assignment is not affected if a constant is

added or subtracted from any row or column of the
standard assignment cost matrix
e.g. if the cost of doing any job on machine 1 is
reduced by k, then the objective function of the
assignment problem becomes
n
Min z (c1 j k ) x1 j cij xij

i 2 j 1
j
n
cij xij k xij

i 1 j 1
j 1
s.t.
n
xi
j 1
i
90
Hungarian Algorithm
Step1 : Find the minimum element in each row of

the n x n cost matrix. Construct a new matrix by
subtracting from each cost the minimum cost in its
row.
For this new matrix, find the minimum cost in
each column. Construct a new matrix by subtracting
from each cost the minimum cost in its column.
91
Hungarian Algorithm
Step 2 : Draw the minimum number of lines

(horizontal and/or vertical) that are needed to cover
all the zeros in the reduced cost matrix.
If n lines are required, an optimal solution is
available among the covered zeros in the matrix. If
fewer than n lines are needed, proceed to Step 3.
92
Hungarian Algorithm
Step 3: Find the smallest element (say k) in the

reduced cost matrix that is uncovered by the lines
drawn in Step 2.
Now subtract k from each uncovered element of
the reduced cost matrix and add k to each element
that is covered by two lines.
Return to step 2.
These operations are the resultant of:

Subtract k from all the uncrossed rows and add k to all
the crossed columns.
93
Example
Machines
M1
M2
M3
M4
J1
26
17
11
J2
13
28
26
J3
38
19
18
15
J4
19
26
24
10
JOBS
94
Example
Machines
M1
M2
M3
M4
J1
18
J2
24
22
J3
23
J4
16
14
JOBS
95
Example
Machines
M1
M2
M3
M4
J1
14
J2
20
22
J3
23
J4
12
14
JOBS
96
Example (J1M1, J2M3, J3M2, J4M4)

Machines
M1
M2
M3
M4
J1
14
J2
20
22
J3
23
J4
12
14
JOBS
97
Maximization Problem: Select the largest element

from the profit matrix and subtract all element from
it. Now we can find the solution to find the minimum
cost which will provide the maximum profit of the
original problem
Unbalanced problem: Add a fictitious job or facility
whichever is required with zero cost.
Impossible assignment: Put a large cost in that cell.
Negative cost: Add the most negative element to all
the elements.
* An Assignment problem may have more than one solution having

the same minimum cost.
98
Example
Table- 1: Maximization problem
I
II
II
99
Example
Jobshop needs to assign 4 jobs to 4 workers. The

cost of performing a job is a function of the skills of
the workers. Table-1 summarizes the cost of the
assignments. Worker 1 cannot do job 3 and worker 3
cannot do job 4.
Determine optimal assignment using Hungarian

method.
100
Example
Table- 1: Cost data
Job
J1
J2
J3
J4
50
50
20
70
40
20
30
90
30
50
70
20
60
70
Worker
101
Example
Table- 1: Cost data
Job
J1
J2
J3
J4
50
50
20
70
40
20
30
90
30
50
70
20
60
70
Worker
102
Start
Schematic presentation of Assignment Problem
Write the problem in tabular form
No
Is it
balanced?
Add dummy row(s)/

column(s)
Yes
Is it a
maximization
problem?
Convert it into a maximization problem:

either (i) by changing the signs of the
elements of the table; or by subtracting
all the values from the largest value
Yes
No
Obtain reduced cost tables:
(i) Subtract from all entries in each row the least
value in the row
(ii) From this table, subtract from all entries in
each column the least value in the column
Can all zeroes

be covered by
less than n lines?
No
Yes
Improve the solution. For this:

(i) Select the minimum of the uncovered (by
lines) cell values.
(ii) Subtract this value from all uncovered cell
values.
(iii) Add this value to the cells lying on the
intersection of any pair of lines.
(iv) Leave the cell values covered by only
one line undisturbed.
Make assignments on
one-to-one match basis
considering zeroes in
rows/columns.
Stop
103

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Transportation, Transshipment and Assignment Problems

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Transportation, Transshipment

and Assignment Problems

The Transportation Problem

The Transportation Problem Many of its application involve

The general transportation problem is concerned with

Procter & Gamble (P &G) - An application Vignette

CASE: SHIPPING WOOD TO MARKET

Unit Cost by Ship ($1,000s)

Unit Cost by Rail

CASE: SHIPPING WOOD TO MARKET

Investment for Ships ($1,000s) Market

CASE: SHIPPING WOOD TO MARKET

Present your results for each option. Compare.

The requirements assumption

Each source has a fixed supply of units, where this entire

Each destination has a fixed demand for units, where this

The cost assumption

The cost of distributing units from any particular source to any

The feasible solution property

A transportation problem will have feasible solutions if and

Integer solution property

For transportation problems where every si and dj have an

The Transportation Problem

Z: The total distribution cost

table of constraint coefficient has the following

, the number of basic variables in any

Example P & T COMPANY

One of the main products of the P & T COMPANY is canned peas.

P &T Co. (Continued)

P &T Co. (Continued)

The problem now is to determine which plan for assigning

LP Formulation: P & T COMPANY

Example P & T COMPANY

A power company has three electric power plants that

The demands in these cities are as follows:

The costs (in 00 Rs) of sending 1 million kwh of

Formulate an LP to minimize the cost of meeting each

Facility Location Analysis

firm to decide where to locate a new factory or warehouse.

framework of one overall distribution system.

entire system is the one that should be chosen

Locating a New Factory for Hardgrave

three plants and they ship to four warehouses

the firm wants to build a new plant

in combination with the existing plants and warehouses

Locating a New Factory for Hardgrave

ESTIMATED PRODUCTION COST

Locating a New Factory for Hardgrave

Locating a New Factory for Hardgrave

Locating a New Factory for Hardgrave

Locating a New Factory for Hardgrave

Locating a New Factory for Hardgrave

Locating a New Factory for Hardgrave

alternatives, Hardgrave can select the lowest cost option

Transportation model can be applied to production

A manufacturer of a certain component has the following estimates of

Production planning problem as transportation problem

R: Regular Time, O: Overtime, D: Dummy

R: Regular Time, O: Overtime, D: Dummy

Solution: Production Scheduling

For use in Month

R: Regular Time, O: Overtime

Northern Airplane (Production Scheduling)