A degenerate transportation problem occurs when the number of basic variables (the routes or allocations used) in the solution is less than the total number of sources plus destinations minus one. In simpler terms, this means that not all supply and demand constraints are fully utilized, leading to a scenario where one or more routes have zero allocations. This can result in ambiguity during the solution process, as it may prevent the algorithm from progressing towards an optimal solution. To address degeneracy, a small adjustment, such as artificially increasing one of the zero allocations, can be made to ensure that the problem can be solved properly.