Analytic Hierarchy Process

Managerial Decision Analysis Journal Summary

PREPARED BY : MOHD FARID AWANG NORHAIZUM SAHRIL KARTINI ABD MANAF

NOR SAKINAH ABDUL EANICH

�  Background of AHP �  Development of AHP �  What is AHP? �  AHP process �  Application �  Advantages &

Disadvantages �  Case study �  Conclusion

OUTLINE

Name   Thomas  L.  Saaty  

Born   Mosul,  Iraq  

DOB   July  18,  1926  (86  yr)  

Degrees   PhD,  Mathema?cs,  Yale  University,  1953  Post-­‐graduate  study,  University  of  Paris,  1952-­‐53  MA,  Mathema?cs,  Yale  University,  1951  MS,  Physics,  Catholic  University  of  America,  1949  BA  ,  Columbia  Union  College,  1948    

Hobbies   Collec?ng  jokes  and  maintaining  his  world-­‐wide  joke  list,  caring  for  his  garden  (coffee-­‐grounds  are  his  latest  find  as  the  best  fer?lizer  ever),  and  collec?ng  new  stories  and  ideas  about  the  crea?ve  process.    

AHP  FOUNDER  

Name   Thomas  L.  Saaty  

Latest  publica?on   Principia  Mathema?ca  Decernendi:  Mathema?cal  Principles  of  Decision  Making,  RWS  Publica?ons,  4922  Ellsworth  Avenue,  Pi]sburgh,  PA  15213,  2010.    

Academic  Ac?vi?es    

His  current  research  is  in  decision-­‐making,  planning,  conflict  resolu?on  and  neural  synthesis.  He  has  published  more  than  300  ar?cles  and  33  books  on  decision-­‐making,  opera?ons  research,  and  mathema?cs.  His  non-­‐technical  book  on  the  AHP,  Decision  Making  for  Leaders,  has  been  translated  to  more  than  10  languages.  His  other  recent  books  are  The  Brain:  Unraveling  the  Mystery  of  How  It  Works,  (generalizing  the  ANP)  and  Crea?ve  Thinking,  Problem  Solving  &  Decision  Making.  At  the  Katz  School  he  teaches  Decision  Making  in  Complex  Environments,  using  both  the  AHP  and  the  ANP  and  Crea?vity  and  Problem  Solving.    

THE  BIRTH  OF  AHP  Dr. Thomas Saaty developed AHP in the 1970’s, while he was a professor at the Wharton School of Business of the University of Pennsylvania, an Ivy League university in Philadelphia, Pennsylvania.

DEVELOPMENT  OF  AHP  

A group of professors lead by Prof. Emilio Esposito from University of Naples “Federico II” have organized a biennial conference called The International Symposium on the Analytic Hierarchy Process (ISAHP). The first conference held in 1988 at Tianjin University, China. It brings together researchers, teachers and users of AHP and ANP to share their research and experiences in decision making.  The latest ISAHP was in 2011 and held in Sorrento (Naples - ITALY) from June 15 to June 18, 2011. The next ISAHP will be held in Malaysia in 2013. (www.ISAHP.org)

WHAT  IS  AHP?  

Qualita?ve  

Quan?ta?ve   Decision  

PRIORITIES  

Factor   Factor  

Alterna?ve   Alterna?ve  

§  Addi;ve  Normaliza;on  §  Eigenvector  §  Geometric  Mean  

AHP  PROCESS  Step  1  

• Defining  the  decision  problem  

Step  2  

• Developing  a  conceptual  framework  

Step  3  

• Semng  up  the  decision  hierarchy  

Step  4  

• Collec?ng  data  from  experts  

Step  5  

• Employing  the  pair-­‐wise  comparison  

Step  6  

• Es?ma?ng  rela?ve  weights  of  elements  

Step  7  

• Calcula?ng  the  degree  of  consistency  

Step  8  

• Calcula?ng  the  mean  rela?ve  weights  

AHP  -­‐  EXAMPLE  

FACTOR  

ALTERNATIVE  

GOAL  

Single  choice  decision  

Mul;-­‐choice  decision  

Ranking  decision  

Prio;za;on  Resource  alloca;on  

Benchmarking  

Quality  Management  

APPLICATION  

SINGLE CHOICE DECISION  

•  Adopting an AHP to select Internet advertising networks  

•  AHP helps evaluate project in India oil pipelines industry

MULTI-CHOICE DECISION  

•  Integrated AHP and entropy to develop a durable goods chain store franchisee selection model  

RANKING DECISION

•  A study of bank selection decision in Singapore using the AHP  

•  Housing environment preferences of young consumers in Guangzhou, China

•  The AHP in project evaluation

APPLICATION  

PRIOTIZATION  

• Going from six sigma to design for six sigma: an exploratory study using AHP  

•  Information priority-setting for better resource allocation using AHP

RESOURCE ALLOCATION  

• Using AHP to analyze the IT outsourcing decision  

APPLICATION  (CONT..)  

BENCHMARKING  

•  Benchmarking facility management: applying AHP  

•  Benchmarking project management practices of Caribbean organizations using AHP

•  Marketing mix formulation for higher education

QUALITY MANAGEMENT  

•  Choosing a quality improvement project using the AHP  

•  Evaluating the comparative service quality of supermarkets using the AHP

•  Measuring the operational performance of ICY using the AHP approach

•  Practical application of an AHP for the improvement of the warranty management

APPLICATION  (CONT..)  

ADVANTAGES  AND  DISADVANTAGES  

ADVANTAGES  

• StraighLorward  and  convenient  

• Simplicity  by  using  pair-­‐wise  comparisons  

• Consistency  in  evalua;on  

• Versa;lity  

DISADVANTAGES  

• Subjec;ve  Evalua;on  -­‐Conversion  from  verbal  to  numeric  scale  -­‐Inconsistencies  imposed  by  1  to  9  scale  -­‐Conflict  between  decision  maker    -­‐Decision  maker  capacity  

INTERESTING  CASES  OF  AHP  §  Xerox   Corpora;on   uses   AHP   for   R&D   decisions   on   porqolio  management,   technology   implementa?on,   and   engineering   design  selec?on.  

§  Bri;sh   Columbia   Ferries   Corpora;on   in   Canada   uses   AHP   in   the  selec?on  of  products,  suppliers  and  consultants.  

§  NASA   used   AHP   to   consider   criteria   for   Safety,   Performance,  Reliability   and   Flexibility   in   recommending   a  power   source   for   the  first  lunar  outpost.  

§  General  Motors  use   AHP   to   evaluate   design   alterna?ves,   perform  risk   management,   and   arrive   at   the   best   and   most   cost-­‐effec?ve  automobile  designs.  

§  Universi;   Islam   Antarabangsa   (UIA)   used   AHP   in   benchmarking  factors   influencing   interna?onal   students’   choice   towards  universi?es  in  Malaysia.  

CASE  STUDY  –    ANUGERAH  USAHAWAN  TERENGGANU  2011  

•  Biennial  event  •  Current  prac?ce  =  weighted  average  

– Compare  candidates  vs  factor  only  •  3  main  factor  •  3  winners  •  Early  assump?on  :  

– Co  A  is  rank  no  1  =  organized,  located  in  prime  area,  proper  documenta?on,  well  presented,  good  appearance  

Co  A   Co  B   Co  C  

Financial   Socio-­‐economy   Management  

The  Winner  

AHP  Model  for    Anugerah  Usahawan  Terengganu  

Applying  AHP  in  ranking  the  3  winners  

A   9   B   7  

A   7   C   3  

C   7   B   7  

MANAGEMENT  

A   3   B   7  

A   3   C   7  

C   3   B   6  

SOCIO-­‐ECONOMY  

A   5   B   8  

A   3   C   9  

C   9   B   7  

FINANCIAL  

SOCIO-­‐  ECONOMY   7   MANAGEMENT   5  

SOCIO-­‐  ECONOMY   7   FINANCIAL   3  

MANAGEMENT   5   FINANCIAL   3  

AHP  MATRIX  

MGTA B C

A 1 9/7 7/3B 7/9 1 7/5C 3/7 5/7 1

1.000 1.000 1.000

FINANCIALA B C

A 1 5/8 3/9B 8/5 1 7/9C 9/3 9/7 1

1.000 1.000 1.000SOCIO-­‐ECONOMY

A B CA 1 3/7 3/7B 7/3 1 6/3C 7/3 3/6 1

1.000 1.000 1.000CRITERIA

Socio Mgt FinanceSocio 1 7/5 7/3Mgt 5/7 1 5/3Fiance 3/7 3/5 1

1.000 1.000 1.000

Addi,ve  Normalisa,on  Method  

MGT A B C Total PrioritiesA 0.453 0.429 0.493 1.375 0.458256B 0.353 0.333 0.296 0.982 0.327209C 0.194 0.238 0.211 0.644 0.214536

1.000 1.000 1.000 3.000 1.000

FINANCIAL A B C Total PrioritiesA 0.179 0.215 0.158 0.551 0.18373B 0.286 0.344 0.368 0.998 0.332565C 0.536 0.442 0.474 1.451 0.483705

1.000 1.000 1.000 3.000 1.000

SOCIO A B C Total PrioritiesA 0.176 0.222 0.125 0.524 0.174564B 0.412 0.519 0.583 1.514 0.504539C 0.412 0.259 0.292 0.963 0.320897

1.000 1.000 1.000 3.000 1.000

CRITERIA PROFIT SUCCESS COST Total PrioritiesPROFIT 0.467 0.467 0.467 1.400 0.46667    SUCCESS 0.333 0.333 0.333 1.000 0.33333    COST 0.200 0.200 0.200 0.600 0.20000    

1.000 1.000 1.000 3.000 1.000

CR  :  0.006    

CR  :  0.013  

CR  :  0.042  

CR  :  0.002  

FINAL  RESULT  

84%  76%  74%  

WHY  ?  •  Commi]ee   favor   Co   A   because   of   percep?on,   what  they  see  and  the  power  of  persuasion  

•  Tend  to  forget  the  main  objec?ve  of  the  Award  •  Equal  percentage  for  all  the  3  main  factors  •  The   marks   given   is   a   one   way   /   direct   from   judge/panel   to   candidates.   No   comparison   between  candidates  

•  Totally   depend   on   the   panel   views   and   percep?on  (based  on  experience  and  background)  

•  CURRENT  APPROACH  IS  NOT  OBJECTIVE  enough  •  Recommend  apply  AHP  in  AUT  2013    

SUMMARY  •  AHP  is  a  simple,  prac?cal  and  handy  •  The   one-­‐to-­‐one   qualita?ve   and   quan?ta?ve  comparison   is   clear   and   easy   to   digest   by   decision  maker.    

•  AHP   could   apply   jointly   with   other   decision   making  tools  such  as  SWOT  analysis  which  will  generate  be]er  result.    

•  AHP   is   being   widely   used   and   accepted   by   various  organiza?on,   enterprises   and   country   all   over   the  world.    

•  AHP   ac?vely   nurture   intellectual   discussion,   debate  and  research  on  various  field  and  study.