The six steps involved in determining an initial VAM solution are illustrated on the Arizona Plumbing Corporation data. We begin with Table T4.4.
VAM Step 1: For each row and column of the transportation table, find the difference between the two lowest unit shipping costs. These numbers represent the difference between the distribu- tion cost on the best route in the row or column and the second best route in the row or column. (This is the opportunity cost of not using the best route.) Step 1 has been done in Table T4.5. The numbers at the heads of the columns and to the right of the rows represent these differences. For example, in row E the three transportation costs are $8, $4, and $3. The two lowest costs are $4 and $3; their difference is $1.
VAM Step 2: Identify the row or column with the greatest opportunity cost, or difference. In the case of Table T4.5, the row or column selected is column A, with a difference of 3.