OPERATIONS

RESEARCH
WHAT IS OPERATIONS RESEARCH?
• Operations research is an analytical method of problem solving and
decision making that is useful in the management of organizations.
• In OR, problems are broken down into basic components and then solved
in defined steps by mathematical analysis.
• Help the organization in solving complex problems on time, with greater
accuracy and in most economical way.
• Today, several OR techniques are available to solve managerial problems
and use of these techniques helps managers become explicit about their
objectives and provides additional information to select an optimal
decision.
HISTORY AND OVERVIEW OF OR
• As a discipline, OR originated in the efforts of military planners during world war II to assist
in military operations. Later it is flourishing in business and industry with the aid of
computers.
• OR involves a wide range of problem-solving techniques and methods such as,
• Linear programming problem
• Transportation problem
• Assignment problem
• Game theory
• Inventory control
• Decision theory
• Simulation
• Queuing theory
• Stochastic process
DEFINITION OF OR
• OR is the application of scientific methods, techniques and tools to
problems involving the operations of a system so as to provide those in
control of the system with optimum solutions to the problem.
Church Man, Ackoff & Arnoff

• OR is a scientific method of providing executive departments with a

quantitative basis for decisions under their control.
P.M.Morse & G.E. Kimball

• OR is a quantitative approach to decision making based on the scientific

method of problem solving.
Kanti swarup, Manmohan & Gupta
 SCOPE AND APPLICATIONS OF OR
• Widely applied in areas of accounting facilities, planning, finance, manufacturing,
marketing, purchasing and in organizations and government and quasi governmental
activities.
• Cash flow planning, credit policy planning of delinquent account strategy and in areas
of accounting
• Warehouses location, transportation loading and unloading, factory size and location
and facilities planning
• In finance, to the qualitative study of investment analysis, portfolio management,
dividend policy etc.
• In marketing, OR is applied to study the selection of product-mix, sales resource
allocation and assignments, production scheduling time, advertising allocation etc.,
• In personnel management, man power planning, resource allocation, staffing,
scheduling of training programs.
LIMITATIONS OF OR
• Mathematical models which are essence of OR do not take into account the qualitative or
emotional factors which are quite real
• Formulation of industrial problem into OR problem is a difficult task
• Mathematical models are applicable to specific category of problems only
• When the basic data is subject to frequent changes, the cost of changing the programmes
manually is a costly affair
PHASES/STAGES OF OR
Step1: Formulate the problem

Step 2: Develop a model

Step 3: Select appropriate data input

Step 4: Solution of the model

Step 5: Validation of the model

Step 6: Implement the solution

MODELLING IN OR
• A model in OR is a simplified representation of an operation or a process in which only
the basic aspects or the most important features of a typical problem under investigation
are considered.

CLASSIFICATION OF
MODELS

MODELS BY MODELS BY EXTENT

MODELS BY NATURE
STRUCTURE OF GENERALITY
a) Deterministic models
a) Physical models a) Specific models
b) Probabilistic models
b) Mathematical models b) General models
MODELS BY STRUCTURE
• PHYSICAL MODELS
• These models include all forms of diagrams, drawings graphs and charts.
• Most of which are designed to deal with specific types of problems.
• By presenting significant factors and inter-relationships in pictorial term, physical models are able to a problem in a manner
that facilitates analysis.
• ICONIC MODELS:
• An icon is an image or likeness of an object or system it represents.
• An iconic model the least abstract physical replica of a system, is usually based on a smaller scale than original.
• These models can stimulate the actual performance of a product thereby availing the tremendous expense of
designing full scale experimental models.
• E.g blue prints, globe, templates etc
• ANALOGUE MODELS:
• Analogue models are closely associated with iconic models.
• However they are not replicas of problem situations.
• Rather, they are small physical systems that have similar characteristics and work like an object or systems it
represents
• e.g a network of water pipes to show flow of current in electrical network, level indicator in a automobile petrol
tank.
• MATHEMATICAL MODELS
• Symbolic models employ a set of mathematical symbols to represent the decision variable of the system under study.
• These variables are related together by mathematical equations.
• These models can be used to maximize the profits or minimize the costs
MODELS BY EXTENT OF GENERALITY
• General model
• General model is one in which does not apply one situation only rather
it has got general applications.
• Specific model
• Specific model is applicable under specific condition only
• e.g. sales response curve, or equation as a function of advertising is
applicable in marketing function alone.
MODELS BY NATURE OF ENVIRONMENT
• Deterministic model
• In this model every thing is defined and the results are certain.
• Certainty is the state of nature assumed in these models.
• Probabilistic model
• In cases of risk and uncertainty, the input and output variables take the
form of probability of occurrence of an event.
ADVANTAGES OF MATHEMATICAL
MODELING
• Models exactly represent the real problem situations
• Models help managers to take decisions faster and more accurately
• Models save valuable resources like money and time
• Large and complex problems can be solved with ease
• Models act as communicators to others by providing information and
impact in changing conditions.
APPLICATIONS OF MODELS
• Mathematical models enables us to identify the real situation by
understanding the model. The models can be used to maximize the profits
or to minimize the costs. The most commonly used models are:
• Linear programming models
• Inventory models
• Sequencing models
• Replacement models
• Transportation and Assignment models
• Decision making models
• Queuing models
• Game theory models
LINEAR PROGRAMMING PROBLEM
• Linear Programming is a problem solving approach that has
been developed to help managers to make decisions.
• Linear Programming is a mathematical technique for
determining the optimum allocation of resources and
obtaining a particular objective when there are alternative
uses of the resources, money, manpower, material, machine
and other facilities.
• It is an optimization method applicable for the solution of optimization
problem where objective function and the constraints are linear

• It was first applied in 1930 by economist, mainly in solving resource

allocation problem

• During World War II, the US Air force sought more effective procedure for
allocation of resources

• George B. Dantzig, a member of the US Air Force formulate general linear

problem for solving the resources allocation problem.

• The devised method is known as Simplex method

TYPES OF LPP

• Maximisation problem such as Maximising the profit

• Minimisation problem such as Minimising the cost
TERMINOLOGIES USED IN LINEAR PROGRAMMING
PROBLEM
1. Components of LP Problem: Every LPP is composed of
– a. Decision Variable,
– b. Objective Function,
– c. Constraints.
2. Optimization: Linear Programming attempts to either maximise or minimize the values of the
objective function.
3. Profit of Cost Coefficient: The coefficient of the variable in the objective function express the
rate at which the value of the objective function increases or decreases by including in the solution
one unit of each of the decision variable.
4. Constraints: The maximisation (or minimisation) is performed subject to a set of constraints.
Therefore LP can be defined as a constrained optimisation problem. They reflect the limitations of the
resources.
5. Input-Output coefficients: The coefficient of constraint variables are called the InputOutput
Coefficients. They indicate the rate at which a given resource is unitized or depleted. They appear on
the left side of the constraints.
6. Capacities: The capacities or availability of the various resources are given on the right hand side
of the constraints.
 GENERAL FORM OF THE LP MODEL
The general LP Model can be expressed in mathematical terms as shown below:
Cj = Cost (Profit) Coefficient
bi = Capacities (Right Hand Side)
Xj = Decision Variables
• Find a vector (x1, x2, x3 ..........xn) that
Minimise or Maximise a linear objective function Z
where Z = c1x1 + c2x2 + ................+ cnxn
• subject to linear constraints
a11x1 + a12x2 + ................+ a1nxn ≤ or = or ≥ b1
a21x1 + a22x2 + ................+ a2nxn ≤ or = or ≥ b2
.......................................................
.......................................................
.......................................................
.......................................................
am1x1 + am2x2 + ................+ amnxn ≤ or = or ≥ bn
and non-negativity constraints
x1 ≥ 0, x2 ≥ 0, .................., xn ≥ 0
• Any vector (x1, x2, x3 ..........xn) of real numbers which satisfies the
constraints of an LPP is called the solution of the LPP
• Any solution of an LPP which satisfies the non-negative restrictions
also is called a feasible solution of the LPP
• Any feasible solution of an LPP which optimizes (maximizes or
minimizes as desired) the objective function is called the optimal
or optimum solution of the LPP.
• An LPP may or may not have an optimum solution. Further,
optimum solution may be unique or infinite in number.
FORMULATION OF THE LINEAR PROGRAMMING MODEL
• Three components are:
1. The decision variable
2. The environment (uncontrollable) parameters
3. The result (dependent) variable
Linear Programming Model is composed of the same components

The Decision
Variable
Objective
Function

The
Constraints
STEPS IN FORMULATION OF LPP
• Identify decision variables
• Write objective function to be optimized (maximised or minimised)
as a linear function of the decision variables after identifying the
cost coefficients (Cj’s)
• Formulate constraints on the basis of the conditions specified
regarding availability of time, demand for the product, etc.,
Constants aij’s and bi’s are involved.
• Define the non-negativity restrictions. Generally as x1, x2, x3 ..........xn
≥ 0.
• A firm produces three products. These products are processed on three different machines.
The time required to manufacture one unit of each of the three products and the daily capacity
of the three machines are given in the table below:

Machine Time per unit (Minutes) Machine

Capacity
Product 1 Product 2 Product 3 (minutes/day)

M1 2 3 2 440
M2 4 - 3 470
M3 2 5 - 430

It is required to determine the daily number of units to be manufactured for each product. The
profit per unit for product 1, 2 and 3 is Rs. 4, Rs.3 and Rs.6 respectively. It is assumed that all the
amounts produced are consumed in the market. Formulate the mathematical (L.P.) model that
will maximise the daily profit.
Formulation of Linear Programming Model
• Step 1
From the study of the situation find the key-decision to be made. In the given situation key decision is to decide the
extent of products 1, 2 and 3, as the extents are permitted to vary.
• Step 2
Assume symbols for variable quantities noticed in step 1. Let the extents (amounts) of products 1, 2 and 3
manufactured daily be x1, x2 and x3 units respectively.
• Step 3
Express the feasible alternatives mathematically in terms of variable. Feasible alternatives are those which are
physically, economically and financially possible. In the given situation feasible alternatives are sets of values of x1, x2 and x3 units
respectively.
Where x1, x2 and x3 ≥ 0. Since negative production has no meaning and is not feasible.
• Step 4
Mention the objective function quantitatively and express it as a linear function of variables. In the present situation,
objective is to maximize the profit.
i.e., Z = 4x1+ 3x2 + 6x3
• Step 5
Put into words the influencing factors or constraints. These occur generally because of constraints on availability
(resources) or requirements (demands). Express these constraints also as linear equations/inequalities in terms of variables.
Here, constraints are on the machine capacities and can be mathematically expressed as
2x1+ 3x2 + 2x3 ≤ 440
4x1+ 0x2 + 3x3 ≤ 470
2x1+ 5x2 + 0x3 ≤ 430
• Hence the LPP is:
Objective function:
Maximise Z = 4x1+ 3x2 + 6x3
Subject to the constraints:
2x1+ 3x2 + 2x3 ≤ 440
4x1+ 0x2 + 3x3 ≤ 470
2x1+ 5x2 + 0x3 ≤ 430
Non- negativity restrictions:
x1, x2 and x3 ≥ 0
Vitamins B1 and B2 are found in two foods F1 and F2. 1 unit of F1 contains 3 units of B1 and 5 units
of B2. 1 unit of F2 contains 5 units of B1 and 7 units of B2 respectively.
Minimum daily prescribed consumption of B1 & B2 is 30 and 40 units respectively. Cost per unit
of F1 & F2 is Rs. 6 & Rs. 3 respectively. Formulate a LPP
Solution:
Vitamins Foods Minimum
Consumption
F1 F2
B1 3 5 30
B2 5 7 40

Decision Variables:
• x1 = No. of units of B1 per day. x2 = No. of units of B2 per day.
• Objective function:
• Min. Z = 6x1 + 3 x2
• Subject to constraints:
• 3x1+ 5x2 ≥ 30 (for F1)
• 5x1+ 7x2 ≥ 40 (for F2) x1, x2 ≥ 0
• A firm makes two products P1 & P2 and has production capacity of 18 tonnes per day. P1 & P2
require same production capacity. The firm must supply at least 4 t of P1 & 6 t of P2 per day.
Each tonne of P1 & P2 requires 60 hours of machine work each. Maximum machine hours
available are 720. Profit per tonne for P1 is Rs. 160 & P2 is Rs. 240. Formulate the LPP.
Solution:
• X1 = Tonnes of P1 / Day ; X2 = Tonnes of P2 / Day
• Max. Z = 160 X1 + 240 X2
• Subject to constraints
• X1 ≥ 4
• X2 ≥ 6
• X1 + X2 ≤ 18
• 60 X1 + 60 X2 ≤ 720
• X1, X2 ≥ 0
METHODS OF SOLVING LPP
• Graphical method
–Graphical method can be used only for a two
variables problem i.e. a problem which involves two
decision variables. The two axes of the graph (X &
Y axis) represent the two decision variables X1 &
X2.
• Simplex method
–a linear-programming algorithm that can solve
problems having more than two decision variables.
• Max Z = 100 X1 + 80 X2
• Subject to constraints:
• 6 X1 + 4 X2 ≤ 7200
• 2 X1 + 4 X2 ≤ 4000 X1, X2 ≥ 0
Solution:
• Constraint No. 1: 6 X1 + 4 X2 ≤ 7200
• Converting into equality:
• 6 X1 + 4 X2 ≤ 7200
• X1 is the intercept on X axis and X2 is the intercept on Y axis. To find X1, let X2 = 0
• 6 X1 = 7200
•
6 X1 = 7200 ⸫X1 = 1200; X2 = 0 (1200, 0)
• To find X2, let X1 = 0
• 4 X2 = 7200 X2 = 1800; X1 = 0 (0, 1800)
• Hence the two points which make the constraint line are:
• (1200, 0) and (0, 1800)
• Constraint No. 2:
• 2 X1 + 4 X2 ≤ 4000
• To find X1, let X2 = 0
• 2 X1 = 4000 ⸫X1 = 2000; X2 = 0 (2000, 0)
• To find X2, let X1 = 0
• 4 X2 =4000 ⸫X2 = 1000; X1 = 0 (0, 1000)
• The co-ordinates of points are:
• 1. Constraint No. 1: (1200, 0) and (0, 1800)
• 2. Constraint No. 2: (2000, 0) and (0, 1000)
• Representing constraint lines on graph
• Constraint No. 1:
• The line joining the two points (1200, 0) and (0, 1800) represents the constraint 6 X1 + 4 X2
≤ 7200.
• The line joining the two points (2000, 0) and (0, 1000) represents the constraint 2 X1 + 4 X2
≤ 4000
 Scale
X Axis 1 cm = 200 units
Y Axis 1 cm = 200 units
(0, 1800)

(0, 1000) A 6 X1 + 4 X2 ≤ 7200

2 X1 + 4 X2 ≤ 4000

O (1200, 0)C (2000, 0)

• Finding the optimal Solution
• The optimal solution always lies at one of the vertices or corners of the feasible region. To find
optimal solution:
• We use corner point method. We find coordinates (X1, X2 Values) for each vertex or corner
point. From this we fine 'Z' value for each corner point.
B is at the intersection of two constraint lines 6 X1 + 4 X2 ≤ 7200 and 2 X1 + 4 X2 ≤ 4000.
Hence, values of X1 and X2 at B must satisfy both the equations.
We have two equations and two unknowns, X1 and X2. Solving simultaneously.
6 X1 + 4 X2 ≤ 7200 (1)
2 X1 + 4 X2 ≤ 4000 (2)
4 X1 = 3200 Subtracting (2) from (1)
X1 = 800
Substituting value of X1 in equation (1), we get 4 X2 = 2400 ⸫X2 = 600
 Vertex Co-ordinates Z = 100 X1 + 80 X2
O X1 = 0, X2 = 0 Z=0
From Graph
A X1 = 0, X2 = 1000 Z = Rs. 80, 000
From Graph
B X1 = 800, X2 = 600 Z = Rs. 1, 28, 000
From Simultaneous equations
C X1 = 1200, X2 = 0 Z = Rs. 1, 20, 000
From Graph

Max. Z = Rs. 1, 28, 000 (At point B)

Optimum Solution:
Optimal Profit = Max Z = Rs. 1, 28, 000
X1 = 800 ; X2 = 600
• Min. Z = 40 X1 + 80 X2
• Subject to constraints:
• 72 X1 + 12 X2 ≥ 216
• 6 X1 + 24 X2 ≥ 72
• 40 X1 + 20 X2 ≥ 200 X1, X2 ≥ 0.
• Solution:
• Constraint No. 1: 72 X1 + 12 X2 ≥ 216
• 72 X1 + 12 X2 = 216
• To find X1, let X2 = 0
• 72 X1 = 216 ⸫X1 = 3, X2 = 0 (3, 0)
• To find X2, let X1 = 0 12 X2 = 216
• ⸫X1 = 0, X2 = 18
• (0, 18)
 2. Constraint No. 2:
6 X1 + 24 X2 ≥ 72 To ⸫ X1 = 12, X2 = 0 (12, 0)
find X1, let X2 = 0
6 X1 = 72
To find X2, let X1 = 0
24 X2 = 72 ⸫ X1 = 0, X2 = 3 (0, 3)

3. Constraint No. 3:
40 X1 + 20 X2 ≥ 200 To ⸫ X1 = 5, X2 = 0 (5, 0)
find X1, let X2 = 0
40 X1 = 200
To find X2, let X1 = 0
20 X2 = 200 ⸫ X1 = 0, X2 = 10 (0, 10)
The co-ordinates of points are:
1. Constraint No. 1: (3, 0) & (0, 18)
2. Constraint No. 2: (12, 0) & (0, 3)
3. Constraint No. 3: (5, 0) & (0, 5)

Every point on the line will satisfy the equation (equality) 72 X1 + 12 X2 = 216.
Every point above the line will satisfy the inequality (greater than) 72 X1 + 12 X2 = 216. Similarly, we can
draw lines for other two constraints.
Feasible Region

(0, 18) A 72 X1 + 12 X2 = 216 Feasible Region

40 X1 + 20 X2 ≥ 200
(0, 10)

B
6 X1 + 24 X2 ≥ 72

(0, 3) C

D
(3, 0) (5, 0) (10, 0)
• The vertices of the feasible region are A, B, C & D.
• For B - Point B is at intersection of constraint lines '72 X1 + 12 X2 ≥ 216' and '40 X1 + 20 X2
• ≥ 200'. Hence, point B should satisfy both the equations.
• 72 X1 + 12 X2= 216 (1)
• 40 X1 + 20 X2 = 200 (2)
• ⸫360 X1 + 60 X2 = 1080 (1) x 5
• 120 X1 + 60 X2 = 600 (2) x 3
• ⸫240 X1 = 480
• X1 = 2
• Substituting value of X1 in equation (1), we get:
• 12 X2= 216 - 144 = 72
• X2= 6
• For C - Point C is at intersection of constraint lines '6 X1 + 24 X2= 72' and '40 X1 + 20 X2 = 200'. Hence, point C should satisfy both
the equations.
• 6 X1 + 24 X2= 72 (1)
• 40 X1 + 20 X2 = 200 (2)
• 30 X1 + 120 X2 = 360 (1) x 5
• 240 X1 + 120 X2 = 1200 (2) x 6
• 210 X1 = 840
• X1 = 4
• Substituting value of X1 in equation (1), we get 24 X2= 72 - 24 = 48
• X2= 2
• Corner Point Method

Vertex Co-ordinates Z = 40 X1 + 80 X2
A X1 = 0, X2 = 18 ⸫Z = 1, 440
From Graph
B X1 = 2, X2 = 6 ⸫Z = 560
From Simultaneous Equations
C X1 = 4, X2 = 2 ⸫Z = 320
From Simultaneous Equations
D X1 = 12, X2 = 0 ⸫Z = 480
From graph

• ⸫Min. Z = Rs. 320 (At point 'C')

• Optimum Solution
• Optimal Cost = Z min = Rs. 320
• X1 = 4 ; X2 = 2
CANONICAL FORM
SLACK VARIABLES
• The dummy variables which are introduced in the constraints of the LPP in order to make the
inequality constraints into ‘equal to’ type are called slack variables. They are usually denoted by
S1, S2 ……Sn
• Eg: The constraint 3X1+2X2+X3 ≤ 3 can be converted into ‘=‘ type by adding a slack variable
3X1+2X2+X3 + S1= 3, where S1 is a slack variable.
STANDARD FORM OF LPP
SIMPLEX METHOD

Use simplex method to solve

Maximise Z = X1+X2+3X3
Subject to the constraints
3X1+2X2+X3 ≤ 3
2X1+X2+2X3 ≤ 2
and X1, X2, X3 ≥ 0
TRANSPORTATION PROBLEM
• A particular class of linear programming problem associated with day-to-day
activities in our real life and mainly deals with logistics.
• Helps in solving problems on distribution and transportation of resources from
one place to another.
• Goods are transported from a set of sources (e.g., factory) to a set of destinations
(e.g., warehouse) to meet the specific requirements.
• Transportation problems deal with the transportation of a product manufactured
at different plants (supply origins) to a number of different warehouses (demand
destinations).
• Objective is to satisfy the demand at destinations from the supply constraints at
the minimum transportation cost possible.
• The model is useful for making strategic decisions involved in selecting optimum
transportation routes so as to allocate the production of various plants to several
warehouses or distributors centers.
TRANSPORTATION PROBLEM
• The transportation problem seeks to minimize the total shipping costs of
transporting goods from m origins or sources (each with a supply si) to n
destinations (each with a demand dj), when the unit shipping cost from
source, i, to a destination, j, is cij.

• The network representation for a transportation problem with two sources

and three destinations is
NETWORK REPRESENTATION OF A
TRANSPORTATION PROBLEM
1 d1
c11
s1 1 c12
c13
2 d2
c21 c22
s2 2
c23
3 d3

SOURCES DESTINATIONS
TABULAR REPRESENTATION OF A
TRANSPORTATION PROBLEM
To D1 D2 …. Dn SUPPLY ai
From
S1 C11 C12 …. C1n a1

S2 C21 C22 …. C2n a2

. . . …. . .
. . . …. . .
. . . …. . .

Sm Cm1 Cm2 …. Cmn am

DEMAND bj b1 b2 …. bn TOTAL
σ𝑚
𝑖=1 𝑎 i = σ𝑛𝑖=1 𝑏 𝑗
BALANCED TRANSPORTATION PROBLEM
• When the total supplies of all sources are equal to the total demand of all
destinations, the problem is a balanced transportation problem.
• Total supply = Total demand

σ𝒎
𝒊=𝟏 𝒂 𝐢 = σ𝒏
𝒊=𝟏 𝒃 𝒋

• This is known as rim requirement.

UNBALANCED TRANSPORTATION
PROBLEM
• When the total supplies of all sources are equal to the total demand of all
destinations, the problem is a balanced transportation problem.
• Total supply ≠ Total demand

σ𝒎
𝒊=𝟏 𝒂 𝐢 ≠ σ 𝒏
𝒊=𝟏 𝒃 𝒋
DEMAND NOT EQUAL TO SUPPLY
• In real-life situations, supply and demand requirement will rarely be equal.
• Because of the variation in production from the supplier end, and
variations in forecast from the customer end.
• Supply variations – shortage of raw materials, labour problems, improper
planning and scheduling
• Demand variations – change in customer preference, change in prices and
introduction of new products by competitors.
SOLVING UNBALANCED
TRANSPORTATION PROBLEM
• Solved by introducing dummy sources and dummy destinations.
• If the total supply is greater than the total demand, dummy destination
(dummy column) with demand equal to supply surplus is added.
• If the total demand is greater than the total supply, dummy source
(dummy row) with supply equal to the demand surplus is added.
• The unit transportation cost for the dummy column and dummy row are
assigned zero values, because no shipment is actually made in case of a
dummy source and destination.
FINDING AN INITIAL BASIC FEASIBLE
SOLUTION
• There are a number of methods for generating an initial basic feasible
solution for a transportation problem.

• Can be obtained by any of the following three methods

(i) North West Corner Method (NWCM)
(ii) Least Cost Method (LCM)
(iii) Vogel’s Approximation Method (VAM)
ALGORITHM FOR NORTH-WEST
CORNER METHOD (NWCM)
i. Select the north-west (i.e., upper left) corner cell of the table and allocate
the maximum possible units between the supply and demand
requirements. During allocation, the transportation cost is completely
discarded (not taken into consideration)
ii. Delete that row or column which has no values (fully exhausted) for
supply or demand
iii. Now, with the new reduced table, again select the North-west corner cell
and allocate the available values.
iv. Repeat steps (ii) and (iii) until all the supply and demand values are zero.
v. Obtain the initial basic feasible solution.
ALGORITHM FOR LEAST COST
METHOD (LCM)
i. Select the smallest transportation cost cell available in the entire table
and allocate the supply and demand
ii. Delete that row/column which has exhausted. The deleted row/column
must not be considered for further allocation
iii. Again select the smallest cost cell in the existing table and allocate. (In
case, if there are more than one smallest costs, select the cells where
maximum allocation can be made)
iv. Obtain the initial basic feasible solution
ALGORITHM FOR VOGEL’S
APPROXIMATION METHOD (VAM)
i. Calculate penalties for each row and column by taking the difference between
the smallest cost and next highest cost available in that row/column. If there are
two smallest costs, then the penalty is zero.
ii. Select the row/column which has the largest penalty and make allocation in the
cell having the least cost in the selected row/column. If two or more equal
penalties exist, select one where a row/column contains minimum unit cost. If
there is again a tie, select one where maximum allocation can be made.
iii. Delete the row/column which has satisfied the supply and demand.
iv. Repeat steps (i) and (ii) until the entire supply and demands are satisfied.
v. Obtain the initial basic feasible solution.
1. Consider the following transportation problem and find the initial solution using north west corner method:

Destination
Sources
1 2 3 Supply
1 15 20 30 350
2 10 9 15 200
3 14 12 18 400
Demand 250 400 300

•Solve the following transportation problem using north west corner rule:
Destination
Sources
1 2 3 Supply
1 25 45 10 200
2 30 65 15 100
3 15 40 55 400
Demand 200 100 300
• Find the initial basic solution for the transportation problem using Vogel’s Approximation Method
Destination
1 2 3 4 Supply

1 4 2 7 3 250
Source 2 3 7 5 8 450
3 9 4 3 1 500
Demand 200 400 300 300

• Find the initial basic feasible solution for the transportation problem using VAM
To
A B C Available
I 50 30 220 2
From II 90 45 170 3
III 250 200 50 4
Requirement 4 2 2