The Transportation Method of Linear Programming
When there is only one source of supply, the cost of supply is calculated by adding the production cost at the supply point and the shipping cost from there to the potential location. But it becomes quite difficult when a network of several supply points can supply a potential location. The total cost of supplying to one location must be compared with the total cost for another location. To make such a comparison, the best match of capacity and demand for each potential location should be evaluated and the costs and profits should be compared.
The transportation method of linear programming that has been discussed in chapter 4 is one of the most effective techniques for evaluating a facility location. The method attempts at matching the capacity and demand of a firm and thereby minimizing the total transportation costs of the firm. The location that incurs minimum total transportation cost will be the right location for setting up of the plant.
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