1. Quantitative Methods
of Management
Transportation Models
PowerPoint presentation by:
Gaasm C.G. ; Caduhada, C.A.; Arciete, J.;
Villanueva, J.; Almendra, P.B.; Apa-ap, N.
© 2006 Prentice
©2006 Prentice Hall, Inc. Hall, Inc.
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2. Outline
 Transportation Modeling
 Developing An Initial Solution
 The Northwest-Corner Rule
 The Intuitive Lowest-Cost Method
 The Stepping-Stone Method
 Special Issues In Modeling
 Demand Not Equal to Supply
 Degeneracy
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3. Learning Objectives
Identify or Define:
 Transportation modeling
 Facility location analysis
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4. Learning Objectives
Identify or Define:
 Degeneracy
 Unbalanced analysis
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5. Learning Objectives
When you complete this module, you
should be able to:
Explain or Be Able to Use:
 Northwest-corner rule
 Intuitive Lowest-Cost Method
 Stepping-stone method
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6. Transportation Modeling
 An interactive procedure that
finds the least costly means of
moving products from a series
of sources to a series of
destinations
 Can be used to help resolve
distribution and location
decisions
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7. Transportation Modeling
 A special class of linear
programming
 Need to know
1. The origin points and the capacity
or supply per period at each
2. The destination points and the
demand per period at each
3. The cost of shipping one unit from
each origin to each destination
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8. Transportation Problem
Albuquerque
To
Boston
Cleveland
Des Moines
$5
$4
$3
Evansville
$8
$4
$3
Fort Lauderdale
$9
$7
$5
From
Table C.1
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9. Transportation Problem
Des Moines
(100 units
capacity)
Albuquerque
(300 units
required)
Figure C.1
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Cleveland
(200 units
required)
Boston
(200 units
required)
Evansville
(300 units
capacity)
Fort Lauderdale
(300 units
capacity)
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10. Transportation Matrix
Figure C.2
To
From
Albuquerque
$5
Des Moines
$4
$3
300
$4
$3
$9
Fort Lauderdale
$7
$5
200
Cost of shipping 1 unit from Fort
Lauderdale factory to Boston warehouse
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Cleveland
$8
Evansville
Warehouse
requirement
Boston
200
Factory
capacity
100
300
300
Des Moines
capacity
constraint
Cell
representing
a possible
source-todestination
shipping
assignment
(Evansville
to Cleveland)
700
Cleveland
warehouse demand
Total demand
and total supply
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11. Northwest-Corner Rule
 Start in the upper left-hand cell (or
northwest corner) of the table and allocate
units to shipping routes 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
3. Check to ensure that all supplies and
demands are met
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12. Northwest-Corner Rule
1. Assign 100 tubs from Des Moines to Albuquerque
(exhausting Des Moines’s supply)
2. Assign 200 tubs from Evansville to Albuquerque
(exhausting Albuquerque’s demand)
3. Assign 100 tubs from Evansville to Boston
(exhausting Evansville’s supply)
4. Assign 100 tubs from Fort Lauderdale to Boston
(exhausting Boston’s demand)
5. Assign 200 tubs from Fort Lauderdale to
Cleveland (exhausting Cleveland’s demand and
Fort Lauderdale’s supply)
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13. Northwest-Corner Rule
To
From
(D) Des Moines
(E) Evansville
(A)
Albuquerque
100
200
Warehouse
requirement
Figure C.3
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300
(C)
Cleveland
$5
$4
$3
$8
$4
$3
$9
(F) Fort Lauderdale
(B)
Boston
100
100
200
$7
200
200
$5
Factory
capacity
100
300
300
700
Means that the firm is shipping 100
bathtubs from Fort Lauderdale to Boston
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14. Northwest-Corner Rule
Computed Shipping Cost
Route
From
To
D
A
E
A
E
B
F
B
F
C
Table C.2
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Tubs Shipped
100
200
100
100
200
Cost per Unit Total Cost
$5
$ 500
8
1,600
4
400
7
700
5
$1,000
Total: $4,200
This is a feasible solution
but not necessarily the
lowest cost alternative
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15. Intuitive Lowest-Cost Method
1. Identify the cell with the lowest cost
2. Allocate as many units as possible to
that cell without exceeding supply or
demand; then cross out the row or
column (or both) that is exhausted by
this assignment
3. Find the cell with the lowest cost from
the remaining cells
4. Repeat steps 2 and 3 until all units
have been allocated
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16. Intuitive Lowest-Cost Method
To
From
(A)
Albuquerque
(C)
Cleveland
$5
(F) Fort Lauderdale
300
$4
$3
$9
(E) Evansville
$4
$8
(D) Des Moines
Warehouse
requirement
(B)
Boston
$7
$5
200
100
200
$3
Factory
capacity
100
300
300
700
First, $3 is the lowest cost cell so ship 100 units from
Des Moines to Cleveland and cross off the first row as
Des Moines is satisfied
Figure C.4
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17. Intuitive Lowest-Cost Method
To
From
(A)
Albuquerque
$5
(F) Fort Lauderdale
300
$4
$9
(E) Evansville
$4
$8
(D) Des Moines
Warehouse
requirement
(B)
Boston
(C)
Cleveland
$7
200
100
100
$3
$3
$5
200
Factory
capacity
100
300
300
700
Second, $3 is again the lowest cost cell so ship 100 units
from Evansville to Cleveland and cross off column C as
Cleveland is satisfied
Figure C.4
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18. Intuitive Lowest-Cost Method
To
From
(A)
Albuquerque
$5
(D) Des Moines
$8
(E) Evansville
$4
200
$9
(F) Fort Lauderdale
Warehouse
requirement
(B)
Boston
300
$4
(C)
Cleveland
100
100
$7
200
$3
$3
$5
200
Factory
capacity
100
300
300
700
Third, $4 is the lowest cost cell so ship 200 units from
Evansville to Boston and cross off column B and row E
as Evansville and Boston are satisfied
Figure C.4
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19. Intuitive Lowest-Cost Method
To
From
(A)
Albuquerque
$5
(D) Des Moines
$8
(E) Evansville
(F) Fort Lauderdale
Warehouse
requirement
(B)
Boston
300
300
$4
200
$9
$4
(C)
Cleveland
100
100
$7
200
$3
$3
$5
200
Factory
capacity
100
300
300
700
Finally, ship 300 units from Albuquerque to Fort
Lauderdale as this is the only remaining cell to complete
the allocations
Figure C.4
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20. Intuitive Lowest-Cost Method
To
From
(A)
Albuquerque
$5
(D) Des Moines
$8
(E) Evansville
(F) Fort Lauderdale
Warehouse
requirement
(B)
Boston
300
300
$4
200
$9
$4
(C)
Cleveland
100
100
$7
200
$3
$3
$5
200
Factory
capacity
100
300
300
700
Total Cost = $3(100) + $3(100) + $4(200) + $9(300)
= $4,100
Figure C.4
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21. Intuitive Lowest-Cost Method
To
From
(A)
Albuquerque
(B)
Boston
$5
ThisDes Moines
(D) is a feasible solution,
and an improvement over
$8
the previous solution, but
(E) Evansville
not necessarily the lowest 200
cost alternative $9
(F) Fort Lauderdale
Warehouse
requirement
300
300
200
$4
$4
(C)
Cleveland
100
100
$7
$3
$3
$5
200
Factory
capacity
100
300
300
700
Total Cost = $3(100) + $3(100) + $4(200) + $9(300)
= $4,100
Figure C.4
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22. 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. Beginning with a plus (+) sign at the
unused corner, place alternate minus
and plus signs at each corner of the
path just traced
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23. Stepping-Stone Method
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 though 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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24. Stepping-Stone Method
To
From
(A)
Albuquerque
(D) Des Moines
100
(E) Evansville
200
-
$8
+
$9
(F) Fort Lauderdale
Warehouse
requirement
$5
300
(B)
Boston
(C)
Cleveland
$4
+
100
-
100
200
$3
$4
$3
$7
200
$5
200
99
Factory
capacity
300
Des MoinesBoston index
300
= $4 - $5 + $8 - $4
700
= +$3
100
$5
100
+
-
201
Figure C.5
© 2006 Prentice Hall, Inc.
+
200
$4
1
$8
99
-
$4
100
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25. Stepping-Stone Method
To
From
(D) Des Moines
(E) Evansville
(A)
Albuquerque
100
200
$5
$3
+
$8
+
100
$4
$3
$9
100
+
300
(C)
Cleveland
$4 Start
-
(F) Fort Lauderdale
Warehouse
requirement
(B)
Boston
200
$7
200
-
200
$5
Factory
capacity
100
300
300
700
Des Moines-Cleveland index
Figure C.6
© 2006 Prentice Hall, Inc.
= $3 - $5 + $8 - $4 + $7 - $5 = +$4
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26. Stepping-Stone Method
To
From
(D) Des Moines
(E) Evansville
(F) Fort Lauderdale
Warehouse
requirement
(A)
Albuquerque
(B)
Boston
(C)
Cleveland
$4
$3
$8
100
$5
$4
$3
200
100
Evansville-Cleveland index
= $3 - $4 + $7 - $5 = +$1
$9
$7
100
200
$5
Factory
capacity
100
300
300
(Closed path = EC - EB + FB - FC)
Fort Lauderdale-Albuquerque index
300
200
200
700
= $9 - $7 + $4 - $8 = -$1
(Closed path = FA - FB + EB - EA)
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C – 26

27. Stepping-Stone Method
1. If an improvement is possible, choose
the route (unused square) with the
largest negative improvement index
2. On the closed path for that route,
select the smallest number found in the
squares containing minus signs
3. Add this number to all squares on the
closed path with plus signs and
subtract it from all squares with a
minus sign
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28. Stepping-Stone Method
To
From
(D) Des Moines
(E) Evansville
(F) Fort Lauderdale
Warehouse
requirement
Figure C.7
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(A)
Albuquerque
100
200
$4
$3
$8
$4
$3
$7
$5
1.
2.
3.
4.
100
+
$9
300
(C)
Cleveland
$5
-
+
(B)
Boston
100
-
200
200
200
Factory
capacity
100
300
300
700
Add 100 units on route FA
Subtract 100 from routes FB
Add 100 to route EB
Subtract 100 from route EA
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29. Stepping-Stone Method
To
From
(D) Des Moines
(E) Evansville
(F) Fort Lauderdale
Warehouse
requirement
(A)
Albuquerque
100
100
100
300
(B)
Boston
(C)
Cleveland
$5
$4
$3
$8
$4
$3
$7
$5
200
$9
200
200
200
Factory
capacity
100
300
300
700
Total Cost = $5(100) + $8(100) + $4(200) + $9(100) + $5(200)
= $4,000
Figure C.8
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30. Special Issues in Modeling
 Demand not equal to supply
 Called an unbalanced problem
 Common situation in the real world
 Resolved by introducing dummy
sources or dummy destinations as
necessary with cost coefficients of
zero
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31. Special Issues in 50($3) + 150($5) + 150(0)
Modeling
Total Cost = 250($5) + 50($8) + 200($4) +
= $3,350
To
From
(D) Des Moines
(E) Evansville
(A)
Albuquerque
250
50
Figure C.9
© 2006 Prentice Hall, Inc.
300
(C)
Cleveland
Dummy
$5
$4
$3
0
$8
$4
$3
0
$5
0
200
$9
(F) Fort Lauderdale
Warehouse
requirement
(B)
Boston
$7
200
50
150
200
150
150
Factory
capacity
250
300
300
850
New
Des Moines
capacity
C – 31

32. Special Issues in Modeling
 Degeneracy
 To use the stepping-stone
methodology, the number of
occupied squares in any solution
must be equal to the number of
rows in the table plus the number
of columns minus 1
 If a solution does not satisfy this
rule it is called degenerate
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C – 32

33. Special Issues in Modeling
To
From
Customer
1
Customer
2
Customer
3
Warehouse 1
100
$8
$2
$6
$10
$9
$9
Warehouse 2
0
$7
Warehouse 3
Customer
demand
Figure C.10
© 2006 Prentice Hall, Inc.
100
100
$10
100
20
80
100
$7
Warehouse
supply
100
120
80
300
Initial solution is degenerate
Place a zero quantity in an unused square
and proceed computing improvement indices
C – 33