Supply Chain Models - Complete

MS-492
Operations Management
Supply Chain Models
Transportation, Assignment, and
Transshipment Problems
By
Dr. Yousaf Ali khan
Department of Management Sciences
GIKI, Pakistan
TRANSPORTATION PROBLEMS
➢ The basic transportation problem was originally developed by F.L.
Hitchcock in 1941 in his study entitled “The distribution of a product from
several sources to numerous locations”.
➢ Transportation problem is a special type of linear programming problem
➢ in which products/goods are transported from a set of sources to a set of
destinations subject to the supply and demand of the source and destination,
respectively; This must be done in such a way as to minimize the cost.
Application of Transportation Problem
• Minimize shipping costs

• Determine low cost location
• Find minimum cost production schedule
• Military distribution system
Two Types of Transportation Problem
• Balanced Transportation Problem where the
total supply equals total demand
Supply = Demand
• Unbalanced Transportation Problem where the
total supply is not equal to the total demand
Supply # Demand
Transportation Problem: Model
Formulation
• The transportation model has two kinds of
constraints:
– Less-than capacity constraints and
– Greater-than demand constraints
• If total capacity equals total demand, both
capacity and demand constraints are “=”.
• If capacity exceeds demand, the capacity
constraints are “>” and the demand constraints are
“<”.
• If demand exceeds capacity, the capacity
constraints are “<” and the demand constraints are
“>”.
Linear Program for the Transportation Example
The Executive Furniture Corporation is faced with the transportation problem shown in
below Figure. The company would like to minimize the transportation costs while
meeting the demand at each destination and not exceeding the supply at each source. In
formulating this as a linear program, there are three supply constraints (one for each
source) and three demand constraints (one for each destination). The decisions to be
made are the number of units to ship on each route, so there is one decision variable for
each arc (arrow) in the network. Let
MS-492
Assignment Problem
By
Dr. Yousaf Ali khan
GIKI, Pakistan
Assignment Model
• This is a special type of LPP in which the objective function is to find the
optimum allocation of a number of tasks (jobs) to an equal number of
facilities (persons). Here we make the assumption that each person can
perform each job but with varying degree of efficiency.
• For example, a departmental head may have 4 persons available for
assignment and 4 jobs to fill. Then his interest is to find the best assignment
which will be in the best interest of the department.
• General form of an Assignment Problem:
• The assignment problem can be stated in the form of n × n, matrix [cij]
called the cost of effectiveness matrix, where cij is the cost of assigning ith
person (facility) to jth job.
Effectiveness Matrix:
Assignment Model
• A person can be assigned to n jobs in n! Possible ways. One
method may be to find all possible n! assignments and
evaluate total cost in all cases. Then the assignment with
minimum cost (as required) will give the optimal assignment.
But this method is extremely laborious.
• For example if n = 8, then the number of such possible
assignments is 8! = 40320. The evaluation cost for all these
allocation will take huge time. Therefore there is a need to
develop an easy computational technique for the solution of
assignment problem.
Mathematical Formulation :
Linear Program for Assignment Example
• The network in below Figure represents a problem faced by the Fix-It Shop, which has
just received three new repair projects that must be completed quickly: (1) a radio, (2)
a toaster oven, and (3) a coffee table. Three repair persons, each with different talents,
are available to do the jobs. The shop owner estimates the cost in wages if the workers
are assigned to each of the three projects. The costs differ due to the talents of each
worker on each of the jobs. The owner wishes to assign the jobs so that total cost is
minimized and each job must have one person assigned to it, and each person can only
be assigned to one job.
MS-492
Hungarian Method of
assigning jobs
By
Dr. Yousaf Ali khan
GIKI, Pakistan
Hungarian Method
Hungarian method
• Hungarian method: Method of assigning jobs by a one-for-

one matching to identify the lowest-cost solution.
• To be able to use the Hungarian method, a one-for-one matching is
required. Each job, for example, must be assigned to only one worker. It is
also assumed that every worker is capable of handling every job, and that
the costs or values associated with each assignment combination are known
and fixed (i.e., not subject to variation). The number of rows and columns
must be the same.
Procedure of the Hungarian method
1. Subtract the smallest number in each row from every number in the row. This is called a
row reduction. Enter the results in a new table.
2. Subtract the smallest number in each column of the new table from every number in the
column. This is called a column reduction. Enter the results in another table.
3. Test whether an optimum assignment can be made. You do this by determining the minimum
number of lines (horizontal or vertical) needed to cross out (cover) all zeros. If the
number of lines equals the number of rows, an optimum assignment is possible. In that
case, go to step 6. Otherwise go on to step 4.
4. If the number of lines is less than the number of rows, modify the table in this way:
a. Subtract the smallest uncovered number from every uncovered number in the table.
b. Add the smallest uncovered number to the numbers at intersections of cross-out lines.
c. Carry over numbers crossed out but not at intersections of cross-out lines carry over
to the next table.
5. Repeat steps 3 and 4 until an optimal table is obtained.
6. Make the assignments. Begin with rows or columns with only one zero. Match items that
have zeros, using only one match for each row and each column. Eliminate both the row
and the column after the match.
Determine the optimum assignment of jobs to workers for the following data
MS-492
Unbalanced Assignment and
Transshipment Problems
By
Dr. Yousaf Ali khan
GIKI, Pakistan
Unbalanced Assignment problem
• The Hungarian method for solving assignment problem requires that

number of rows and number of columns must be equal. If the number of
rows and column are not equal, the problem becomes an unbalanced
assignment problem. To solve an unbalanced assignment problem, the
number of rows or the number of columns are added as per the add dummy
rows with zero elements to make it a square matrix. Once it become a
square matrix, solve the problem by Hungarian method to get the optimal
assignment.
• Example: there are four machines W, X, Y and Z. three jobs A, B and C are
to be assigned to the 3 machines out of total 4 machines. The cost of
assignment is given below. Find out the optimal assignment?
Machines
Jobs W X Y Z
A 18 24 28 32
B 8 13 17 18
C 10 15 19 22
• Solution: This is an unbalanced assignment problem as the number of rows are not equal
to number of columns. Therefore in order to make it a square matrix, add a dummy row
(D) with zero cost elements. Thus the modified matrix become
Job W X Y Z
A 18 24 28 32
B 8 13 17 18
C 10 15 19 22
D 0 0 0 0
• The reduce matrix after row operation is; (Column operation is not necessary a there is
already one and in each column). Job W X Y Z
A 0 6 10 14
B 0 5 9 10
C 0 5 9 12
D 0 0 0 0
• Minimum number of lines to connect all zeros is two, which not fulfill the criteria. Now
select the smallest element which is not covered by the lines and subtract it from all
other elements which are not covered by the lines and add it at the intersection of two
lines. The resulting matrix will be:
Job W X Y Z
A 0 1 5 9 Minimum number of lines = 3 (less than the order of the
B 0 0 4 5 matrix). Therefore repeat the process. The resulting matrix is
C 0 0 4 7
D 5 0 0 0 Optimal assignment is
Job W X Y Z A – W – 18
A 0 1 1 5
B – Y – 17
B 0 0 0 1
C – X – 15
C 0 0 0 2
D 0 4 0 0
Total - 50
The Transshipment Model
• In a transportation problem, if the items being transported must go through
an intermediate point (called a transshipment point) before reaching a final
destination, the problem is called a transshipment problem. For example, a
company might be manufacturing a product at several factories to be
shipped to a set of regional distribution centers. From these centers, the
items are shipped to retail outlets that are the final destinations. Belo figure
provides a network representation of a transshipment problem. In this
example, there are two sources, two transshipment points, and three final
destinations.
Minimal-Spanning Tree Problem
• The minimal-spanning tree technique involves
connecting all the points of a network together while
minimizing the distance between them. It has been
applied, for example, by telephone companies to
connect a number of phones together while minimizing
the total length of telephone cable.
For connecting all nodes with a minimum total distance
Decision: Which arcs to choose to connect all nodes?
Objective: Minimize the total distance of the arcs chosen

Steps for the Minimal-Spanning Tree
Technique
• Nodes are not pre-specified as origins or destinations
• So we do not formulate as LP model
• Instead there is a solution procedure
Steps
1. Select any node in the network.
2. Connect this node to the nearest node that minimizes the
total distance.
3. Considering all of the nodes that are now connected, find
and connect the nearest node that is not connected. If there
is a tie for the nearest node, select one arbitrarily. A tie
suggests there may be more than one optimal solution.
4. Repeat the third step until all nodes are connected.
Construction Company: Example
• Let us consider the Lauderdale Construction Company, which is currently
developing a luxurious housing project in Panama City Beach, Florida.
Melvin Lauderdale, owner and president of Lauderdale Construction, must
determine the least expensive way to provide water and power to each
house. The network of houses is shown in below figure
Building a network of water pipes to supply water to 8 houses (distance in hundreds of feet)
Steps 1 and 2
Starting arbitrarily with node (house) 1, the closest node is node 3
Second and Third Iterations

Fourth and Fifth Iterations
Sixth and Seventh Iterations

After all nodes
(homes) are
connected the total
distance is 16 or
1,600 feet of water
pipe

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MS-492

• Minimize shipping costs

• Hungarian method: Method of assigning jobs by a one-for-

• The Hungarian method for solving assignment problem requires that

Decision: Which arcs to choose to connect all nodes?

Objective: Minimize the total distance of the arcs chosen

Second and Third Iterations

Sixth and Seventh Iterations

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