In this supplement, you will learn about . . .
The Transportation Model
The Transshipment Model
An important factor in supply chain management is determining the lowest-cost transportation provider from among several alternatives. In most cases, items are transported from a plant or warehouse to a producer, a retail outlet, or distributor via truck, rail, or air. Sometimes the modes of transportation may be the same, but the company must decide among different transportation carriers—for example, different trucking firms. Two quantitative techniques that are used for determining the least cost means of transporting goods or services are the transportation method and the transshipment method.
A transportation model is formulated for a class of problems with the following characteristics: (1) a product is transported from a number of sources to a number of destinations at the minimum possible cost, and (2) each source is able to supply a fixed number of units of the product and each destination has a fixed demand for the product. The following example demonstrates the formulation of the transportation model.
•Transportation model: involves transporting items from sources with fixed supply to destinations with fixed demand at the lowest cost