A Business Encyclopedia

Modified Distribution Method

Definition: The Modified Distribution Method or MODI is an efficient method of checking the optimality of the initial feasible solution.

The concept of MODI can be further comprehended through an illustration given below:

  1. Initial basic feasible solution is given below:MODI-1
  2. Now, calculate the values of ui and vj by using the equation:
    ui+vj = Cij
    Substituting the value of u1 as 0
    U1+V1 = C11, 0+V1 = 6 or V1 = 6
    U1 +V2 = C12, 0+V2 = 4 or V2 = 4
    U2+V2 = C22, U2+4 = 8 or U2 = 4
    U3+ V2 = C32, U3+4 = 4 or U3 = 0
    U3+V3 = C33, 0+V3 = 2 or V3 =2MODI-2
  3. Next step is to calculate the opportunity cost of the unoccupied cells (AF, BD, BF, CD) by using the following formula:
    Cij – (ui+Vi)

    AF = C13 – (U1+V3),  1- (0+2) = -1 or 1
    BD = C21 – (U2+v1),   3- (4+6) = -7 or 7
    BF = C23 – (U2+V3),   7- (4+2) = 1 or -1
    CD = C31- (U3+V1),    4- (0+6) = -2 or 2
  1. Choose the largest positive opportunity cost, which is 7 and draw a closed path, as shown in the matrix below. Start from the unoccupied cell and assign “+” or “–“sign alternatively. Therefore, The most favored cell is BD, assign as many units as possible.MODI-Final
  2. The matrix below shows the maximum allocation to the cell BD, and that number of units are added to the cell with a positive sign and subtracted from the cell with a negative sign.MODI-3
  3. Again, repeat the steps from 1 to 4 i.e. find out the opportunity costs for each unoccupied cell and assign the maximum possible units to the cell having the largest opportunity cost. This process will go on until the optimum solution is reached.

The Modified distribution method is an improvement over the stepping stone method since; it can be applied more efficiently when a large number of sources and destinations are involved, which becomes quite difficult or tedious in case of stepping stone method.

Modified distribution method reduces the number of steps involved in the evaluation of empty cells, thereby minimizes the complexity and gives a straightforward computational scheme through which the opportunity cost of each empty cell can be determined.

Leave a Reply

Your email address will not be published. Required fields are marked *


Related pages

two bin system in inventory managementpromotional budget definitionwhat's internship meanwhat is demand forecasting in managerial economicsdefine snowballparticipative decision making modeltypes of training methods in hrmmeaning of exploitativedefinition geocentricguerrilla tactics definitionqualitative market researchcyclical unemployment refers tochallenger marketing strategywhat does straddle meandeontological ethical theorymeaning of deontologyholistically defpost office monthly income scheme misestament definitionmeaning of polycentricdefinition of quota in economicscollective bargain definitionwhat is deontological ethics definitiondefinition guerrilla warfaredefine stratified sampling in statisticsdeontology meaningfactors affecting consumer decision processdefinition of nonverbalthe concept of collective bargaininglines intersect at right anglesdominate hindi meaningexamples of informal groupsmeaning of social loafingabraham maslow definitiondebtor collection periodsensibility analysisconcentration banking and lock box systemitemized definitiondefine isoquants in economicsretained profit disadvantagespoison pill strategythe law of diminishing marginalprofit economics definitioninstrumental conditioning marketingdefinition autonomouslyexchange rate defmarginal costing meaningmonopolistic competitiocarrot and stick meaningpf employer contribution ratecharacteristics of sampling distributionprocess of hrmdefinition of probability samplingretrenchment strategy in strategic managementbusiness ethic theoriesobjectives of quality circlediminished marginal utilitymouton meaninggeocentric attitude definitionmodern motivational theorynominal group methodexample of oligopoly in economicsperpetual dividend growth modelhenri fayol division of workmarket research defbuyer behaviour definitiondefine a perfectly competitive marketkanban 2 bin systemsukanya meaningdeontological and teleological ethical theoryneeds and importance of demat accountcurrent asset turnover ratio formulaoligarchy marketoligopoly definition and characteristicsmeaning and definition of capital budgetingmeaning of percolated