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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.