Transhipment Problem In Transportation Model

Introduction:

We may come across a certain situation that a company (or companies) may be producing the product to their capacity, but the demand arises to these products during certain period in the year or the demand may reach the peak point in a certain period of the year

transshipment problem:

a)      This is particularly true that products like Cool drinks, Textbooks, Notebooks and Crackers, etc. The normal demand for such products will exist, throughout the year, but the demand may reach peak points during certain months in the year.

b)      It may not possible for all the companies put together to satisfy the demand during peak months. It is not possible to produce beyond the capacity of the plant.

c)       Hence many companies have their regular production throughout the year, and after satisfying the existing demand, they stock the excess production in a warehouse and satisfy the peak demand during the peak period by releasing the stock from the warehouse.

d)      This is quite common in the business world. Only thing that we have to observe the inventory carrying charges of the goods for the months for which it is stocked is to be charged to the consumer.

e)      When a company stocks its goods in warehouse and then sends the goods from warehouse to the market, the problem is known as Transshipment problem.

f)       Let us work one problem and see the methodology of solving the Transshipment Problem.

EXAMPLE: A company has three factories X, Y and Z producing product P and two warehouses to stock the goods and the goods are to be sent to four market centers A, B, C and D when the demand arises. The figure given below shows the cost of transportation from factories to warehouses and from warehouses to the market centers, the capacities of the factories, and the demands of the market centers. Formulate a transportation matrix and solve the problem for minimizing the total transportation cost.