Transportation problem is defind as (Primal model)
- we have muktiple factory and multiple customer
- each factory has a capacity amount of items
- each customer place an order amount of items
- there are a different cost of sending 1 item from factoryABC to customerABCD
- To minimize transportation cost,
- which factory should send item to each customer
- and how many items do that factory send.
In another view of problem (Duality model – provide vital economic interpretations)
- If we want to expand a factory (to increase a capacity per factory), How much cost will be reduced.
- If customers order more items, How much profit we will get.
shadow price :the optimal values of dual variables associate with each constraint
- is a price that paid for 1 unit of resource.
reduced cost : associate with each decision variable. defined as the change in objective function value
- is also called opportunity cost.