Vogel’s Approximation Method (VAM) Step-I: Compute the penalty values for each row and each column. The penalty will be equal to the difference between the two smallest shipping costs in the row or column. Step-II: Identify the row or column with the largest penalty. Find the first basic variable which has the smallest shipping cost in that row or column. Then assign the highest possible value to that variable, and cross-out the row or column which is exhausted. Step-III: Compute new penalties and repeat the same procedure until all the rim requirements are satisfied.

Step 1: Compute the penalties in each row and each column .

Step 2: Identify the largest penalty and choose least cost cell to corresponding this penalty

Step-3: Allocate the amount 5 which is minimum of corresponding row supply and column demand and then cross out column2

Step-4: Recalculate the penalties

Step-5: Identify the largest penalty and choose least cost cell to corresponding this penalty

Step-6: Allocate the amount 5 which is minimum of corresponding row supply and column demand, then cross out column3

Step-7: Finally allocate the values 0 and 15 to corresponding cells and cross out column 1