ECONOMICS OF INTERNATIONAL

TRANSPORTATION

TITLE OF THE PROJECT

“OPTIMIZATION OF TRANSPORTATION COST OF

LCD TV”

SUBMMITED BY: SUBMITTED TO:

Dr. NAVAL KARRIR

RAJEV KUMAR PAL

1
 INDEX

S. Topic Page
No. No.
1 Executive Summary 3
2 Introduction 4
3 Background 5
4 Transportation Problem 6
5 Approach and Methodology 8
Phase I – Obtaining an initial feasible solution
6 Northwest-Corner Method 8
7 The Minimum Cell Cost method 9
8 Vogel’s Approximation Method (VAM) 10
Phase II – Moving towards optimality
9 MODI Method 11
10 Stepping-Stone Method 15
11 Analysis 17
12 Sensitivity Analysis 18
13 Conclusion 21
14 References 22

2
 EXECUTIVE SUMMARY

Today electronic products have become the main power of national economy
growth. All the manufacturers have set their primary markets to meet the
consumer’s demand. Taking the current LCD TV manufacturers as an example,
they have to emphasize on the product design, performance and the reduction of
cost. Therefore, nowadays the most important task for LCD TV industry is that
the international manufacturer shall fix a suitable win–win price and productive
capacity for itself as well as for the Original Equipment Manufacturing (OEM)
when the OEM has received the order, so that both sides could construct a long-
established relation and they could reach the object of maximized profit.

This paper, reports the results from a series of various methods regarding how
the transportation cost of SONY LCD TV (50”) could be optimized.
Manufacturers have managed to break through the constraints of cost and
complex cooperation relationship between partners, through strategic co-
ordination and integration.

Effective distribution of SONY LCD TV improves all of the five performance

dimensions (cost, flexibility, responsiveness, delivery, and financial return),
although the degrees of improvement on different performance dimensions are
different to some extent.

3
 INTRODUCTION

In the fiscal year 2008, ending in March 2009, Sony incurred its largest
operational loss in its history of $2.4 billion. Sharp incurred a net loss of $1.3
billion in fiscal 2008, ending March 2008, citing stagnant consumption, fierce
competition. (Source has given in references pg.)

“The struggle for growth during the economic downturn forced, many
companies has stetted the target to reduce their prices in order to increase sales
and to maintain their market share on the basis of contract manufacturers for
cost-reduction opportunities.”

To succeed in this shifting environment, Sony needs to build strong links with
suppliers. It is important that Sony and its suppliers share policies, strategies
and technology. Collaboration between Sony and its suppliers should ultimately
be aimed at earning customer approval. This goal must form the common base
of Sony's procurement activities and its suppliers' sales activities. Sony calls
suppliers capable of maintaining this kind of collaborative relationship
"partners."

The overall structure of the SONY LCD TV supply chain is shown the
integration of the SONY LCD TV supply chain influences manufacturers’
capability to satisfy market requirements. The integration relationship involves
suppliers, manufacturer, and firms downstream. In the co-ordination between
manufacturer and suppliers, the manufacturer sets up production planning by
demand forecasting or firm order from certain customers, and then places orders
to all Consumer demand and customer requirements are pushing the industry
very hard in the areas of product quality, price and delivery lead times, with

4
customers expecting manufacturers to provide the production flexibility to
respond to fluctuations in demand.
BACKGROUND
SONY LCD TV (50”) which has total cost at factories Rs. 40,000

Transportation Mode Truck (By Road) which includes the Cost Factors (Transportation Costs
Rs.220/km., Admin. Cost, Insurance Cost@2.9%, Loading Charges, Octrai, Taxes (toll taxes
+ excise duty + etc), and Warehouses charges, Unloading Charges etc.)

A liquid crystal display (LCD) is a thin, flat panel used for electronically displaying
information such as text, images, and moving pictures. It has no problem to transport if it's still
in the factory packaging. Most manufacturers go through a decent amount of work to make
sure their packaging can stand up to fairly stressful conditions. For large LCD's it is harder to
do so; however, it is usually at least packaged so that it can stand on any side. If there is no
'this side up' on the box, then it is safe to transport on its side. (They are careful to note if
damage will occur when transported on one side, because they would be liable for damage
otherwise.) Without factory packaging-- The screens are fairly delicate to puncture and
should not be transported face-down or at a weird orientation. Factory packaging equalizes
pressure on all sturdy surfaces to minimise the risk of damage, and without packaging
there is none of this protection. Some of the packer’s movers Kanpur, Noida, Ghaziabad
and Faridabad also offer warehousing and storage facilities to the customers. They have well
built, spacious and moisture free warehouse well guarded by the companies employed guards
and workers. Warehouse are friendly for the storing all kinds like household items, industrial
goods, commercial goods, office goods and many other lovable commodities of the
customers.

Table (A) Distance and Warehouses between Destination and Sources

S.N. Distance (Km) W1 W2 W3

1 GZB-Dehradun (216km.) Saharanpur

2 GZB-Mumbai (1418 km.) Bhopal Pune

3 GZB-Chennai (2114 km.) Bhopal Nagpur Vijayawada

4 Delhi-Dehradun (235km.) Saharanpur

5 Delhi-Mumbai (1407 km.) Bhopal Pune

6 Delhi-Chennai (2095km.) Bhopal Nagpur Vijayawada

7 Kanpur-Delhi (575 km.) Delhi Saharanpur

8 Kanpur- Mumbai (1288 km.) Nagpur Pune

5
9 Kanpur- Chennai (1885 km.) Nagpur Vijayawada
TRANSPORTATION PROBLEM
A destination may receive its demand from many sources.
So, “The objective is to determine the transporting plan, to meet all demands but not exceed
any supply, to minimize the total transportation cost.”
The standard transportation model seeks to find a transportation plan for SONY LCD TV
(50”) from Ghaziabad, Delhi and Kanpur warehouses to Dehradun, Mumbai and Chennai
stores.
The data in the model includes:
(1) The amount of supply at each source and the demand at each destination;
(2) The unit transportation cost of the SONY LCD TV (50”) from each source to each
destination.
Table (1)

Warehouse/ Dehradun Mumbai Chennai Supply

Stores
Ghaziabad Rs.2667 Rs.3781 Rs.4525 150 Units
Delhi Rs.2768 Rs.3760 Rs.4500 200 Units
Kanpur Rs.3473 Rs.3635 Rs.4267 150 Units
Demand 100 Units 200 Units 200 Units 500 Units

Transportation Problem is a special case of Linear Programming:

The LP formulation of the TP problem is:

Let,

Xij = quantity of SONY LCD TV (50”) transport from source i to destination j

Cij = per unit transporting cost from sources i to destination j (from Ghaziabad, Delhi and
Kanpur warehouses to Dehradun, Mumbai and Chennai stores)

Si be the row i total supply (where i= 1, 2, 3,)

Dj be the column j total demand (where j= 1, 2, 3)

For this type of problem all units are available

3 Warehouse and 3 Stores

No. of Variables is 9

No. of Constraints is 6 (Constraints are for warehouses capacity and stores demand)

To solve the transportation problem by its special purpose algorithm, it is required that the
sum of the supplies at the warehouses equal the sum of the demands at the stores.

∑Si(i=1,2,3) = ∑Dj(j=1,2,3) = 500 units

6
LP Formulation

The linear programming formulation in terms of the amounts shipped from the origins to the
destinations, Xij, can be written as:

Objective function:

Minimize Z = 2667X11 +2768X21 +3437X31 + 3781X21 + 3760X22 + 3635X23 + 4525X31

+4500X32 +4267X33

Subject to the constraints:

X11+X21+X31 > 100

X12+X22+X32 > 200

X13+X23+X33 > 200

X11+X12+X13 < 150

X21+X22+X23 < 200

X31+X32+X33 < 150

With non negativity condition: X11,X12,X13,X21,X22,X23,X31,X32,X33 > 0

Network Representation:

Figure (1)
Ghaziabad
Dehradun
(D1) 100 units
(S1) 150 units

Mumbai Delhi

(S2) 200 units (D2) 200 units

Chennai Kanpur

(S3) 150 units (D3) 200 units

7
(Warehouses) (Stores)

APPROCH AND METHODOLOGY

The transportation problem is solved in two phases:

Phase I — obtaining an initial feasible solution

Phase II — moving toward optimality

In Phase I, the Minimum-Cost Procedure can be used to establish an initial basic feasible
solution without doing numerous iterations of the Simplex Method.

There are three different ways:

• Northwest corner method

• The Minimum cell cost method

• Vogel’s approximation method (VAM)

Northwest corner method:

The North West corner method is easy to use and requires only simple calculation. As the
method’s name implies, we start work in the northwest corner or the upper left cell. Make an
allocation to this cell that will use either all the demand for that row or all the supply for that
column, whichever are smaller as cell (1, 1) 100 units (Rs. 2667). We see that, site1’s supply
is smaller than Dehradun’s demand. This eliminates column site 1 from further consideration
because we used all its demand and now repeat the above steps, we have the following
tableau and Stop since all allocated have been assigned.

Initial tableau of NW corner method

Table (2)

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2667 100 Rs.3781 50 Rs.4525 150 Units

Delhi Rs.2768 Rs.3760 150 Rs.4500 50 200 Units

Kanpur Rs.3473 Rs.3635 Rs.4267 15 150 Units

Demand 100 Units 200 Units 100 Units 500 Units

8
The initial basic feasible solution is:

2667X11 +3781X21 + 3760X22 + 4500X32 +4267X33 =

2667(100) +3781(50) + 3760(150) + 4500(50) +4267(150) = Rs.18,84,800

Minimum cell cost method:

The initial basic feasible solution obtained by this method usually gives a lower beginning
cost, so start with lowest cost (Rs.2667) entry 100 units in the cell (1, 1) and allocated as
much possible, i.e., X11= 100 units. The next lowest cost (Rs.2768) lies in the cell (2, 1), so
make no allocation, because the demand from Dehradun Store was already used in the cell (1,
1). The next lowest cost (Rs.3635) lies in the cell (3, 2), so allocated X32 =150 units.
Similarly for cell (2, 2) allocation is X22 = 50 units, X31 =50 units, X32= 150 units.

Initial tableau of the Minimum cell cost method

Table (3)

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2667 100 Rs.3781 Rs.4525 50 150 Units

Delhi Rs.2768 Rs.3760 50 Rs.4500 15 200 Units

Kanpur Rs.3473 Rs.3635 150 Rs.4267 150 Units

Demand 100 Units 200 Units 200 Units 500 Units

The initial basic feasible solution is:

2667X11 +3760X22 + 3635X23 + 4525X31 +4500X32 =

2667(100) +3760(50) + 3635(150) + 4525(50) +4500(150) = Rs.19,01,200

The cost is more by Rs.1, 16,400, as compared to the cost obtained by Northwest corner
method.

Vogel’s approximation method (VAM):

9
 In this method there are some steps to obtaining initial basic feasible solution.

Step 1: for each column and row, determine its penalty cost by subtracting their two of their
least cost

Step 2: select row/column that has the highest penalty cost in step 1

Step 3: assign as much as allocation to the selected row/column that has the least cost

Step 4: Block those cells that cannot be further allocated

Step 5: Repeat above steps until all allocations have been assigned

Initial tableau of the Vogel’s approximation method (VAM)

Table (4)

Penalty (2768- (3635- (4500-

2667)=101 3760)=125 4267)=233
Warehouse(i)/ Dehradun Mumbai Chennai Supply Penalty Penalty
Stores(j)
Ghaziabad Rs.2667 100 Rs.3781 50 Rs.4525 150 Units (3781- (4542-
2667)=1114 3781)=744
Delhi Rs.2768 Rs.3760 150 Rs.4500 50 200 Units (3760- (4500-
2768)=792 3760)=740
Kanpur Rs.3473 Rs.3635 Rs.4267 150 150 Units (3635- (4267-
3473)=162 3635)=632
Demand 100 Units 200 Units 200 Units 500 Units

The initial basic feasible solution is:

2667X11 +3781X21 + 3760X22 + 4500X32 +4267X33 =

2667(100) +3781(50) + 3760(150) + 4500(50) +4267(150) = Rs.18, 84,800

Initial solution from:

Northeast cost, total cost = Rs.1884800

The min cost, total cost = Rs.1901200

VAM, total cost = Rs.1884800

It shows that the 1st and 3rd method has the min cost. So, this will be used to obtaining optimal
solution.

Phase II —
10
 In Phase II, the Stepping Stone Method, using the MODI method for evaluating the reduced
costs may be used to move from the initial feasible solution to the optimal one.

Modified distributed method (MODI):

It is a modified version of stepping stone method

MODI has three important elements:

(1) It determines if a tableau is the optimal one

(2) It tells you which non-basic variable should be firstly considered as an entry variable

(3) It makes use of stepping-stone to get its answer of next iteration

Modified distributed method (MODI) for Initial tableau of the Vogel’s approximation
method (VAM):

Initial tableau of the Vogel’s approximation method (VAM)

Table 4(a)

Vi V1 V2 V3

Ui Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

U1 Ghaziabad Rs.2667 100 Rs.3781 50 Rs.4525 150 Units

U2 Delhi Rs.2768 Rs.3760 150 Rs.4500 50 200 Units

U3 Kanpur Rs.3473 Rs.3635 Rs.4267 15 150 Units

Demand 100 Units 200 Units 200 Units 500 Units

Let’s test to see whether the current tableau (4a) represent the optimal solution. We can do
this because of duality and sensitivity analysis to interpret. We can introduce two
quantities Ui,

and Vj, where Ui, is the dual variable associated with row i and Vj, is the dual variable

associated with column. From duality theory:

Ui + Vj, = Cij ……………………..eq (1) Represent all Basic Variables

We can compute all Ui, and Vj, values from the initial tableau (4a) using eq (1):

U1 + V1 = Rs.2667 (C11)………………………………….................................................… (1)

11
U1 + V2 = Rs.3781 (C12)……………………………………………………………………. (2)

U2 + V2= Rs.3760 (C22)…………………………………………………………….………. (3)

U2 + V3 = Rs.4500 (C23)……………………………………………………………………. (4)

U3 + V3= Rs.4267 (C33)……………………………………………………….……………. (5)

Since, there are five equations and six unknowns (because we added a non basic variable). To
solve these equations, it is necessary to assign only one of the unknown a value of zero. We
can arbitrarily assign a value to one of the unknown. A common method is to choose the row
with the largest number of allocations i.e. (U1= 0).

Using substitute calculates the Basic Variables:

Basic Variables: (U1= 0, U2= -21, U3= -254 and V1= 2667, V2=3781, V3=4521)

To recognize whether this tableau represents the Optimal Solution;

For every Non basic Variable (those cells without any allocations)

Cij – Ui – Vj = Kij > 0……………………..…eq (2) (represent Non-Basic Variable)

For cell (1, 3) C13 – U1 – V3 = K13= 4…………………………….eq (a)

For cell (2, 1) C21 – U2 – V1= K21= 122..........................................eq (b)

For cell (3, 1) C31 – U3 – V1= K31 = 1060.......................................eq (c)

For cell (3, 2) C32 – U3– V2 = K32 = 108.........................................eq (d)

Non Basic Variables: (K13= 4, K21= 122, K31 = 1060, K32 = 108 > 0)

Eq (2) is true in every case of eq (a), eq (b), eq (c), eq (d), because these variables are
satisfied with non negativity condition (K13, K21, K31, K32> 0). So the current tableaus
(4a) represent the optimal solution and Rs.18, 84,800 is the lowest cost of
transportation.

Modified distributed method (MODI) for Initial tableau of the Minimum cell cost method:

Table 3(a) Initial tableau of the Minimum cell cost method

Vi V1 V2 V3

12
Ui Warehouse(i)/ Dehradun Mumbai Chennai Supply
Stores(j)

U1 Ghaziabad Rs.2667 100 Rs.3781 Rs.4525 50 150 Units

U2 Delhi Rs.2768 Rs.3760 50 Rs.4500 15 200 Units

U3 Kanpur Rs.3473 Rs.3635 15 Rs.4267 150 Units

Demand 100 Units 200 Units 200 Units 500 Units

From duality theory: (source given in references)

Ui + Vj, = Cij ……………………..eq (1) Represent all Basic Variables

We can compute all Ui, and Vj, values from the initial tableau (3a) using eq (1):

(Where Ui, is the dual variable associated with row i and Vj, is the dual variable associated
with column and Cij represent the cost of the allocation cell)

Ui + Vj = Cij (Represent the all basic variables)

U1 + V1 = Rs.2667 (C11)………………………………….................................................… (6)

U1+ V3 = Rs.4525 (C13)…………………………………………………………….………. (7)

U2 + V2= Rs.3760 (C22)…………………………………………………………….………. (8)

U2 + V3 = Rs.4500 (C23)……………………………………………………………………. (9)

U3 + V2= Rs.3635 (C32)…………………………………………………….……..………. (10)

Such that, there are five equations and six unknowns (because we added a non basic
variable). To solve these equations, it is necessary to assign only one of the unknown a value
of zero. (Let U1=0) because U1 has largest number of allocations.

Basic Variables

U1= 0, U2= -25, U3= -50 and V1= 2667, V2=3785, V3=4525

To recognize whether this tableau represents the Optimal Solution;

For every Non basic Variable (those cells without any allocations)

Cij – Ui – Vj = Kij > 0…………………………….…....eq (2) (represent Non-Basic Variable)

13
For cell (1, 3) C13 – U1 – V3 = K12= -4………………………………………………...……. (e)

For cell (2, 1) C21 – U2 – V1= K21= 126.................................................................................. (f)

For cell (3, 1) C31 – U3 – V1= K31= 885.................................................................................. (g)

For cell (3, 2) C32 – U3– V2 = K33 = -208............................................................................... (h)

Non Basic Variables

K12= -4,K21= 126, K31 = 856, K32 = -208

Eq (2) is true in the case of eq (f) and eq (g) i.e. (K21= 126 >0, K31= 885>0)

Eq is not true in the case of eq (e) and eq (h) i.e. (K12= -4 < 0, K33 = -208 < 0) this
condition does not satisfies with the non negativity conditions, so the current tableau (..)
does not represent the optimal solution.

Stepping Stone Method

Table 3(b)

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2667 100 Rs.3781 -4 Rs.4525 50 150 Units

Delhi Rs.2768 12 Rs.3760 50 Rs.4500 15 200 Units

6
Kanpur Rs.3473 85 Rs.3635 150 Rs.4267 - 150 Units
6 20
8
Demand 100 Units 200 Units 200 Units 500 Units

For simplex (Minimization Problems), Chose the most negative reduced cost K33= -208
determined by cell (3, 3) as the new entering variable to reduce the cost by allocating this cell
(3, 3) and to increase the value as much as possible so place the (+) in this cell (3, 3). (The
stepping stone path for this cell (3, 3) is (2, 2), (2, 3), (3, 2), (3, 3) Table ()). For equilibrium
in everything place (-) in the cell (2, 3) and place (+) in cell (2, 2), this indicate the equality in
this row and then Place (-) in cell (3, 2). The allocations in cell (2, 3) and cell (3, 2)
(subtraction cells) are 150 and 150 respectively. Thus the new solution is obtained by
reallocating 150 on the stepping stone path. Thus for the next tableau:

X33 = 0 + 150 = 150 (0 is its current allocation)

14
 X23 = 150 - 150 = 0

X22 = 50 + 150 = 200

X32 = 150 - 150 = 0 (blank for the next tableau)

Table 3(c)

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2667 100 Rs.3781 -4 Rs.4525 50 150 Units

Delhi Rs.2768 12 Rs.3760 50 Rs.4500 15 200 Units

6 (+) (-)

Kanpur Rs.3473 85 Rs.3635 150 Rs.4267 - 150 Units

6 (-) (+) 20
8
Demand 100 Units 200 Units 200 Units 500 Units

Table 3(d)

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2667 100 Rs.3781 Rs.4525 50 150 Units

Delhi Rs.2768 Rs.3760 20 Rs.4500 200 Units

Kanpur Rs.3473 Rs.3635 Rs.4267 150 150 Units

Demand 100 Units 200 Units 200 Units 500 Units

Modified distributed method (MODI)

Table 3(e)

15
 Vi V1 V2 V3

Ui Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

U1 Ghaziabad Rs.2667 100 Rs.3781 Rs.4525 50 150 Units

U2 Delhi Rs.2768 Rs.3760 200 Rs.4500 200 Units

U3 Kanpur Rs.3473 Rs.3635 Rs.4267 150 150 Units

Demand 100 Units 200 Units 200 Units 500 Units

Ui + Vj, = Cij ……………………..eq (1) Represent all Basic Variables

We can compute all Ui, and Vj, values from the initial tableau (3e) using eq (1):

(Where Ui, is the dual variable associated with row i and Vj, is the dual variable associated
with column and Cij represent the cost of the allocation cell)

Ui + Vj = Cij (Represent the all basic variables)

U1 + V1 = Rs.2667 (C11)……………………………….................................................… (11)

U1 + V3 = Rs.4525 (C13)………………………………………………………………….. (12)

U2 + V2= Rs.3760 (C22)…………………………………………………………….……. (13)

U3+ V3= Rs.4267 (C33)……………………………………………………….…………… (14)

Such that, there are five equations and six unknowns (because we added a non basic
variable). To solve these equations, it is necessary to assign only one of the unknown a value
of zero. (Let U1=0) because U1 has largest number of allocations.

Basic Variables:

U1= 0, U2= -851, U3= -146 and V1= 3619, V2=3781, V3=5351

To recognize whether this tableau represents the Optimal Solution;

For every Non basic Variable (those cells without any allocations)

16
Cij – Ui – Vj = Kij ………………………..eq (2) empty cell (represent non-basic variable)

C12 – U1 – V2 = K12= 0…………………………………………………………………….. (i)

C21 – U2 – V1= K21= 0........................................................................................................... (j)

C23 – U2 – V3= K23= 0........................................................................................................... (k)

C31 – U3 – V1= K31 = 0........................................................................................................... (l)

C32 – U3– V2 = K32 = 0.......................................................................................................... (m)

Analysis:
Basic Variables

U1= 0, U2= -851, U3= -146 and V1= 3619, V2=3781, V3=5351
Non Basic Variables

K12= K21= K23= K31= K32= 0

Kij = 0 the solution is optimal and unique and this satisfied the non negativity condition
for the transportation problem.

Total transportation cost:

2667X11 + 3760X22 + 4525X32 +4267X33

2667(100) + 3760(150) + 4525(50) +4267(150) = Rs.1086160

SENSITIVITY ANALYSIS

Sensitivity Analysis investigates the change in the optimum solution resulting from making
changes in parameters of the linear programming of transportation problem, So the changes

17
in coefficients of (Cij) Cost Factors (Transportation Cost @ Rs. 180.00 per km, Insurance @
2.7%, Tax- Toll Tax, Excise Duty @ 3%Warehouse Charges, And Unloading Charges) of the

Objective Function:

Minimize C = 2970.80X11 +3005.00X21 +3665.00X31 + 5349.40X12 + 5315.60X22 +

5105.40X32 + 6628.80X13 +6597.00X23 +6387.20X33

Table (1a)

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2970.80 Rs.5349.40 Rs.6628.80 150 Units

Delhi Rs.3005.00 Rs.5315.60 Rs.6597.00 200 Units

Kanpur Rs.3665.00 Rs.5105.40 Rs.6387.20 150 Units

Demand 100 Units 200 Units 200 Units 500 Units

NW Corner Method:

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2970.80 10 Rs.5349.40 50 Rs.6628.80 150 Units

0
Delhi Rs.3005.00 Rs.5315.60 15 Rs.6597.00 50 200 Units

Kanpur Rs.3665.00 Rs.5105.40 Rs.6387.20 15 150 Units

Demand 100 Units 200 Units 200 Units 500 Units

The initial basic feasible solution is:

2970.80X11 +5349.40X12 + 5315.60X22 + 6597.00X23 +6387.20X33

2970.80(100) +5349.40(50) + 5315.60(150) + 6597.00(50) +6387.20 (150) = Rs.26181440

18
 Minimum Cell Cost Method:

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2970.80 10 Rs.5349.40 Rs.6628.80 50 150 Units

0
Delhi Rs.3005.00 Rs.5315.60 50 Rs.6597.00 15 200 Units

Kanpur Rs.3665.00 Rs.5105.40 15 Rs.6387.20 150 Units

Demand 100 Units 200 Units 200 Units 500 Units

The initial basic feasible solution is:

2970.80X11 +5315.60X22 + 5105.40X32 + 6628.80X13 +6597.00X23

2970.80(100) +6628.80(50) + 5315.60(50) + 6597.00(150) +5105.40(150) = Rs.2649680
VAM:

Penalty 34.20 210.20 421.00

Warehouse(i)/ Dehradun Mumbai Chennai Supply Penalty Penalty

Stores(j)
Ghaziabad Rs.2970.80 Rs.5349.40 Rs.6628.80 150 Units 2378.80 1279.80
100 50

Delhi Rs.3005.00 Rs.5315.60 Rs.6597.00 200 Units 2310.60 1281.40

200

Kanpur Rs.3665.00 Rs.5105.40 Rs.6387.20 150 Units 1440.40 1070.60

15
0
Demand 100 Units 200 Units 200 Units 500 Units

The initial basic feasible solution is:

2970.80X11 + 5315.60X22 + 6628.80X13 +6387.20X33

2970.80(100) +6628.80(50) + 5315.60(200) +6387.20 (150) = Rs.2681060
Northeast cost, total cost = Rs.2618140
19
The min cost, total cost = Rs.2649680

VAM, total cost = Rs.2681060

And now, to obtaining optimal solution select the Minimum Cell Cost Method tableau
Modified distributed method (MODI) for Initial tableau of the Minimum cell cost method:

Warehouse(i)/ Dehradun Mumbai Chennai Supply

Stores(j)

Ghaziabad Rs.2970.80 10 Rs.5349.40 Rs.6628.80 50 150 Units

0
Delhi Rs.3005.00 Rs.5315.60 50 Rs.6597.00 15 200 Units

Kanpur Rs.3665.00 Rs.5105.40 15 Rs.6387.20 150 Units

Demand 100 Units 200 Units 100 Units 500 Units

Basic Variables

U1= 0, U2= -31.80, U3= -242 and V1= 2970.80, V2=5347.40, V3=6629.20
Non Basic Variables

K12= 2,K21= 66, K31 = 836.20, K33 = .40

Kij > 0 the solution is optimal and unique and this satisfied the non negativity condition
for the transportation problem, therefore an optimal basic feasible solution will
maintain its optimality if the change in Cij.

CONCLUSION

.
The LCD-TV market will continue to grow robustly during the downturn in
2009; the operational and financial challenges caused by the recession are
forcing many OEMs to reconsider their internal expansion plans and
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outsourcing strategies, as well as to initiate changes that are having an
immediate impact on the supply chain

“Sony believes that cooperation as true partners is critical to supplying products

that achieve high levels of customer satisfaction. Sony and its suppliers work
together in a wide range of areas - by combining technological skills that
complement each other, building powerful supply chains, preserving and
enhancing the quality of parts, strictly complying with relevant laws and
regulations and contributing to society as a whole.”

In this paper, a particular method for evaluating the sensitivity analysis of

supply and demand values was presented.
Supposing the balance in the algorithms of transportation problems, the
sensitivity analysis of transportation problems is, in one hand, a simultaneous
analysis of right-hand-side parameters and on the other hand, the
implementation of the balanced equation. Like a constraint, this balanced
equation directly affects the parameters whose changes are important. Thus, in
the sensitivity analysis of supply and demand in transportation problem,
because of the functional relation between supply and demand parameters, we
always face the simultaneous changes of parameters.

REFERENCES

• S.D.Sharma, Operation Research, (Theory, Methods and Applications),

2009, pg.TP.1-TP81

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• Ford, L.R., and D.R. Fulkerson, Flows in networks, Princeton Univ.
Press, 1962.

• H. Arsham, A.B. Kahn, Simplex-type algorithm for general

transportation problems
• An alternative to stepping-stone, J. Opl Res Soc, 40 (1989), 581-590.
• NERALIĆ, L. (1979): Modified Lagrangians and optimization of
costs, Ph. D. Thesis, Faculty of Economics, University of Zagreb, Zagreb

• http://www.rpi.edu/dept/math/math-
programming/cplex90/amplcplex90userguide.pdf

• Hamdy A Taha, 1997, Duality and Sensitivity Analysis, pg. no. 115-
162

• http://www.faqs.org/abstracts/Electronics-and-electrical-industries/Sony-
arms-security-sets-with-network-functions-digital-
recorders.html#ixzz0ZVBqpMTW

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