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This thesis develops a three-stage TSP heuristic called Modified I3. The first stage constructs an initial subtour which contains substantially more vertives than the original I3 method. The second stage, a simplification of the GENIUS heuristic, inserts the remaining vertices into the subtour. The third stage, also a simplification of the GENIUS heuristic, adjusts and improves the complete tour. A Turbo C program is developed to evaluate the performance of Modified I3 using 30 test problems selected from the literature and the TSPLIB library. Modified I3 performs close to or better than I3 in 10 test problems and executes much faster than I3. Examining the characteristics of test problems reveals that Modified I3 yields more accurate solutions when the distribution of vertices is close to actual geographical situations. This thesis also applys Modified I3, together with the Spacefilling Curve clustering algorithm, to solve the VRP problem. 7 test problems are selected from the TSPLIB library. Modified I3 and SFC performs better than other VRP heuristis in 1 test problem. The future research direction is to revise the clustering algorithm in order to improve the overall performance.
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