Chemical Engineering Economics

Transportation Model
Introduction
The transportation model addresses the concept of moving a thing from one place to
another without change. It assumes that any damage in route has negative consequences, and so
it's used to analyze transportation systems and find the most efficient route for resource
allocation.
Transportation models play an important role in logistics and supply chain
management for reducing cost and improving service. Therefore, the goal is to find the most
cost effective way to transport the goods. Transportation problems are among the most pressing
strategic development problems in many cities, often a major constraint for long-term urban
development, in general, and very closely related to land development, economic structure,
energy policies, and environmental quality. Since all citizens are either enjoying the
transportation system or, and often at the same time, suffering from it, it is an important element
of the urban quality of life. The transportation problems is generally to be solved, deals with
inefficiency of urban transportation systems and underlying land use patterns, which negatively
affect quality of life, economic efficiency, and the environment; the high (and often hidden)
costs of urban transportation in both socio-economic and environmental terms; and in particular
the environmental consequences both in terms of physical aspects that include land and resource
use, ecological aspects, and human health problems. Efficient tools for comprehensive strategic
analysis that are directly useful to city administrations are lacking.

Transportation Problem
The transportation problem is a special type of linear programming problem, where the
objective is to minimize the cost of distributing a product from a number of sources to a number
of destinations.
If xij(≥0) is the number of units shipped from ith source to jth destination, then equivalent LPP
model will be

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For a feasible solution to exist, it is necessary that total capacity equals total to the
n m
requirements. If ∑ ai=¿ ∑ b j ¿ i.e. If total supply = total demand then it is a balanced
i=1 j=1
transportation problem otherwise it is called unbalanced Transportation problem. There will be
(m + n -1) basic independent variables out of (m x n) variables.
In order to solve transportation problems you need to consider:
 The capacity of each of the supply points (or sources) – the quantity of goods that can be
produced at each factory or held at each warehouse. This is called the supply or stock.
 The amount required at each of the demand points– the quantity of goods that are needed
at each shop or by each customer. This is called the demand (or destination).
 The unit cost of transporting goods from the supply points to the demand points.
Types of Transportation Problem
n m
 If ∑ ai=¿ ∑ b j ¿ i.e. If total supply = total demand then it is a balanced transportation
i=1 j=1
problem.
n m
 If ∑ ai ≠ ∑ b j i.e. If total supply ≠ total demand then it is an unbalanced transportation
i=1 j=1
problem.

Solution of Transportation Problem

The solution algorithm to a transportation problem can be summarized into following steps:
Step 1: Formulate the problem and set up in the matrix form.
The formulation of transportation problem is similar to LP problem formulation. Here the
objective function is the total transportation cost and the constraints are the supply and demand
available at each source and destination, respectively.
Step 2: Obtain an initial basic feasible solution.
This initial basic solution can be obtained using any of the following methods:
Methods to find basic initial solutions
1. North-West Corner Rule
It is a simple and an efficient method to obtain an initial solution. This method does not take
into account the cost of transportation on any route of transportation. This method can be
summarized as follows:
Step 1: Start with the cel at the upper left (north-west) corner of the transportation matrix and
allocate as much as possible equal to the minimum of the rim values for the first row and first
column, i.e. min (a1, b1).

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Step 2: (a) If allocation made in step 1 is equal to the capacity of the first source (a1, in first
row), then move vertically downward to the cell (2,1) in the second row and first column and
apply step1 again, for next allocation.
(b) If allocation made in step1 is equal to the first destination (b1, in first column), then
move horizontally to the cell (1, 2) in the first row and second column and apply step1 again for
next allocation.
(c) If a1 = b1, allocate x11 = a1, or b1 and move diagonally to the cell (2, 2).
Step 3: Continue the procedure step by step till an allocation is made in the south-east corner
cell of the transportation table.
2. Vogel Approximation Method

Vogel’s approximation Method (penalty or regret method) is a heuristic method and is

preferred to the other two methods described above. In this method each allocation is made on
the basis of the opportunity (or penalty or extra) cost that would have incurred if allocation in
certain cells with minimum unit transportation cost were missed. In this method allocations are
made so that the penalty cost is minimized. The advantage of this method is that it gives an
initial solution which is nearer to an optimum solution or is the optimum solution itself. The
steps in VAM are as follows:

Step1: Calculate penalties for each (column) by taking the difference between the smallest and
next smallest unit transportation cost in the same row (column).This difference indicates the
penalty or extra cost which has to be paid if one fails to allocate to the cell with the minimum
unit transportation cost.
Step2: Select the row or column with the largest penalty and allocate as much as possible in the
cell having the least cost in the selected row or column satisfying the rim conditions. If there is a
tie in the values of penalties then it can be broken by selecting the cell where maximum
allocation can be made.
Step3: 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 them is crossed out and the remaining row
(column) is assigned a zero supply (demand).Any row or column with zero supply or demand
should not be used in computing future penalties.
Step4: Repeat step1 to 3 until the entire available supply at various sources and demand at
various destinations are satisfied.
3. Least Count Method
Since our objective is to minimize the total transportation cost, we must try to transport as
must as possible through the routes (cells) where the unit transportation cost is minimum. This
method takes in to account the minimum unit cost and can be summarized as follows:

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Step1: Select the cell with the smallest unit cost in the entire transportation table and allocate as
much as possible to this cell and eliminate (line out) that row or column in which either supply
or demand is exhausted. If both a row and column are satisfied simultaneously only one may be
crossed out. In case, the smallest unit cost cell is not unique, the then select the cell where
maximum can be made.
Step2: After adjusting the supply and demand for all uncrossed – out rows and column repeat
the procedure with smallest unit cost among the remaining all rows and column of the
transportation and allocate as much as possible to this cell and eliminate (line out) that row and
column in which either supply and demand is exhausted.
Step3: Repeat the procedure available until the entire available supply at various sources and
demand at various destination is satisfied. The solution so obtained need not to be
nondegenerate.
The solution obtained by any of the above methods must fulfill following conditions:
I. The solution must be feasible, i.e., it must satisfy all the supply and demand constraints.
This is called RIM CONDITION.
II. The number of positive allocations must be equal to m+ n – 1, where, m is number of
rows and n is number of columns. The solution that satisfies both the above mentioned
conditions is called a non-degenerate basic feasible solution.
Step 3: Test the initial solution for optimality. Using any of the following methods can test the
optimality of obtained initial basic solution:
I. Stepping Stone Method
II. Modified Distribution Method (MODI)
If the solution is optimal then stop, otherwise, determine a new improved solution.
Step 4: Updating the solution repeat Step 3 until the optimal solution is arrived at.

Characteristics of Transportation Model

 A product is transported from a number of sources to a number of destinations at the
minimum possible cost.
 Each source is able to supply a fixed number of units of the product, and each destination
has a fixed demand for the product.
 The linear programming model has constraints for supply at each source and demand at
each destination.
 All constraints are equalities in a balanced transportation model where supply equals
demand.
 Constraints contain inequalities in unbalanced models where supply does not equal
demand.

Applications of Transportation Model

 Minimize shipping costs.
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 Determine low cost location.

 Find minimum cost production schedule.
 Military distribution system.

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