Transportation Problem

Introduction
• Special class of linear programming problems called ‘network flow’
problems.
• Related to Supply chains
• Each problem is graphically represented in the form of a network.
• Supply Chain – A set of all interconnected resources involved in
producing and distributing a product.
• Raw material producers, part-suppliers, distribution centers, warehouses,
assembly plants etc.
• Supply chains are designed to satisfy customer demand for a product
at minimum cost.
Transportation Problem
• The transportation problem arises frequently in planning for the
distribution of goods and services from several supply locations to
several demand locations.
• Typically,
• Quantity of goods available at each supply location (origin) is limited
• Quantity of goods needed at each demand location (destination) is known
• Objective in a transportation problem – minimize the cost of shipping goods
from the origins to destinations.
Example 1
• The problem involves transportation of a product from three plants to four
distribution centers at Foster Generators.
• Plants are in Cleveland, Ohio ; Bedford, Indiana and York, Pennsylvania.
• Production capacities over the next-three month planning period for one
particular type of generator are as follows:
Origin Plant Three-month Production
Capacity (units)
1 Cleveland 5,000
2 Bedford 6,000
3 York 2,500
Total – 13,500
Example 1
• The firm distributes its generators through four regional distribution
centers located in Boston, Chicago, St. Louis, and Lexington.
• The three-month forecast of demand for the distribution center is as
follows:
Destination Distribution Center Three-month Demand
Forecast (units)
1 Boston 6,000
2 Chicago 4,000
3 St. Louis 2,000
4 Lexington 1,500
Total – 13, 500
Example 1
• Management would like to determine how much of its production
should be shipped from each plant to each distribution center.
• Transportation costs per units are as follows:

Destination

Origin Boston Chicago St. Louis Lexington

Cleveland 3 2 7 6

Bedford 7 5 2 3

York 2 5 4 5
Solution

Route Units Shipped Cost per Unit ($) Total Cost

From To
Cleveland Boston 3500 3 10,500
Cleveland Chicago 1500 2 3,000
Bedford Chicago 2500 5 12,500
Bedford St. Louis 2000 2 4,000
Bedford Lexington 1500 3 4,500
York Boston 2500 2 5,000
Problem Variations
1. Total Supply not equal to total demand –
• If total supply exceeds total demand, no modifications in the linear
programming are necessary. Excess supply will appear as slack (unused supply
or amount not shipped from the origin).
• If total supply is less than total demand, the linear programming model will
not have a feasible solution. –
• modify the network by adding a dummy origin with supply = difference between the
total demand and the total supply.
• Zero cost per unit is assigned to any arc leaving the dummy origin
• Destinations showing shipments received from the dummy origin, will experience
shortfall or unmet demand
Problem Variations
2. Maximization Objective Function –
• Objective is to maximize profit or revenue – simply solve a maximization
problem instead of minimization
• Does not affect constraints
3. Route Capacities or Route Minimums –
• Capacities or minimum quantities for one or more of the routes
• Example: York-Boston route had a capacity of 1000 units because of limited
space available on its mode of transportation – add a constraint, x31<= 1000.
• Route minimum – previously committed order for Bedford-Chicago of at
least 2000 units – add a constraint, x22 >= 2000
Problem Variations
4. Unacceptable Routes –
• Establishing a route from every origin to every destination may not be
possible.
• Drop the corresponding variable from the linear programming formulation.
• Example – Cleveland-St. Louis route were unacceptable or unusable, remove
x13 from the model.
Example 2
• Tri-County Utilities, Inc., supplies natural gas to customers in a three-county area.
• The company purchases natural gas from two companies: Southern Gas and
Northwest Gas.
• Demand forecasts for the coming winter season are as follows: Hamilton County,
400 units; Butler County, 200 Units; and Clermont County, 300 units.
• Contracts to provide the following quantities have been written: Southern Gas,
500 units; and Northwest Gas, 400 units.
• Distribution costs for the counties vary, depending upon the location of the
suppliers. The distribution costs per unit (in thousands of dollars) are as follows:
To
From Hamilton Butler Clermont
Southern Gas 10 20 15
Northwest Gas 12 15 18
Example 2
1. Develop a network representation of this problem.
2. Develop a linear programming model that can be used to determine
the plan that will minimize total distribution costs.
3. Describe the distribution plan and show the total distribution cost.
4. Recent residential and industrial growth in Butler County has the
potential for increasing demand by as much as 100 units. Which
supplier should Tri-County contract with to supply the additional
capacity?
Solution

Route Units Distributed Cost per unit ($) Total Cost

From To
Southern Gas Hamilton County 200 10 2,000
Southern Gas Clermont County 300 15 4,500
Northern Gas Hamilton County 200 12 2,400
Northern Gas Butler 200 15 3,000
Total – 11,900