MIS 463

Analytic Hierarchy Process

The Analytic Hierarchy Process (AHP)
 Founded by Saaty in 1980.
 It is a popular and widely used method for
multi-criteria decision making.
 Allows the use of qualitative, as well as
quantitative criteria in evaluation.
 Wide range of applications exists:
 Selecting a car for purchasing
 Deciding upon a place to visit for vacation
 Deciding upon an MBA program after graduation.

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AHP-General Idea
 Develop an hierarchy of decision criteria and define the
alternative courses of actions.

 AHP algorithm is basically composed of two steps:

1. Determine the relative weights of the decision criteria
2. Determine the relative rankings (priorities) of alternatives

! Both qualitative and quantitative information can be

compared by using informed judgments to derive
weights and priorities.

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 Example: Car Selection
 Objective
 Selecting a car
 Criteria
 Style, Reliability, Fuel-economy Cost?
 Alternatives
 Civic Coupe, Saturn Coupe, Ford Escort, Mazda
Miata

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 Hierarchy tree

Selecting
a New Car

Style Reliability Fuel Economy

Civic Saturn Escort Miata

Alternative courses of action

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Ranking of Criteria and Alternatives
 Pairwise comparisons are made with the grades
ranging from 1-9.

 A basic, but very reasonable assumption for

comparing alternatives:
If attribute A is absolutely more important than attribute B
and is rated at 9, then B must be absolutely less
important than A and is graded as 1/9.

 These pairwise comparisons are carried out for

all factors to be considered, usually not more
than 7, and the matrix is completed.
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Ranking Scale for Criteria and Alternatives

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 Ranking of criteria

Style Reliability Fuel Economy

Style 1 1/2 3

Reliability 2 1 4

Fuel Economy 1/3 1/4 1

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 Ranking of priorities
 Consider [Ax = maxx] where
 A is the comparison matrix of size n×n, for n criteria, also called the priority matrix.
 x is the Eigenvector of size n×1, also called the priority vector.
 max is the Eigenvalue, max  > n.

 To find the ranking of priorities, namely the Eigen Vector X:

1) Normalize the column entries by dividing each entry by the sum of the column.
2) Take the overall row averages.

Row
Normalized 0.30 0.29 0.38 0.30
1 0.5 3 Column Sums
averages
A= 2 1 4 0.60 0.57 0.50 0.60
X=
0.33 0.25 1.0 0.10 0.14 0.13 0.10
Priority vector
Column sums 3.33 1.75 8.00 1.00 1.00 1.00

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 Criteria weights
 Style .30
 Reliability .60
 Fuel Economy .10

Selecting a New Car

1.00

Style Reliability Fuel Economy

0.30 0.60 0.10

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Checking for Consistency
 The next stage is to calculate a Consistency Ratio
(CR) to measure how consistent the judgments have
been relative to large samples of purely random
judgments.

 AHP evaluations are based on the aasumption that

the decision maker is rational, i.e., if A is preferred to
B and B is preferred to C, then A is preferred to C.

 If the CR is greater than 0.1 the judgments are

untrustworthy because they are too close for comfort
to randomness and the exercise is valueless or must
be repeated.

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Calculation of Consistency Ratio
 The next stage is to calculate max so as to lead to
the Consistency Index and the Consistency Ratio.
 Consider [Ax = max x] where x is the Eigenvector.
A x Ax x

1 0.5 3 0.30 0.90 0.30

0.60 1.60 = max
0.60
2 1 4 =
0.10 0.35 0.10
0.333 0.25 1.0

λmax=average{0.90/0.30, 1.60/0.6, 0.35/0.10}=3.06

Consistency index , CI is found by

CI=(λmax-n)/(n-1)=(3.06-3)/(3-1)= 0.03

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Consistency Ratio
 The final step is to calculate the Consistency Ratio, CR by using
the table below, derived from Saaty’s book. The upper row is the
order of the random matrix, and the lower row is the
corresponding index of consistency for random judgments.

Each of the numbers in this table is the average of CI’s derived from a
sample of randomly selected reciprocal matrices of AHP method.

An inconsistency of 10% or less implies that the adjustment is small as

compared to the actual values of the eigenvector entries.
A CR as high as, say, 90% would mean that the pairwise judgments are just
about random and are completely untrustworthy! In this case, comparisons
should be repeated.

In the above example: CR=CI/0.58=0.03/0.58=0.05

0.05<0.1, so the evaluations are consistent!

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 Ranking alternatives
Style Priority vector
Civic Saturn Escort Miata
Civic 1 1/4 4 1/6 0.13
Saturn 4 1 4 1/4 0.24
Escort 1/4 1/4 1 1/5 0.07
Miata 6 4 5 1 0.56

Reliability Civic Saturn Escort Miata

Civic 1 2 5 1 0.38
Saturn 1/2 1 3 2 0.29
Escort 1/5 1/3 1 1/4 0.07
0.26
Miata 1 1/2 4 1

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Ranking alternatives
Miles/gallon Normalized

Fuel Economy Civic 34 .30

Saturn 27 .24
Escort 24 .21
Miata 28 .25
113 1.0

! Since fuel economy is a quantitative measure, fuel consumption

ratios can be used to determine the relative ranking of alternatives;
however this is not obligatory. Pairwise comparisons may still be
used in some cases.

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 Selecting a New Car
1.00

Style Reliability Fuel Economy

0.30 0.60 0.10

Civic 0.13 Civic 0.38 Civic 0.30

Saturn 0.24 Saturn 0.29 Saturn 0.24
Escort 0.07 Escort 0.07 Escort 0.21
Miata 0.56 Miata 0.26 Miata 0.25

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Ranking of alternatives

Reliability

Economy
Style

Fuel
Civic .13 .38 .30 .30 .30
Saturn .24 .29 .24 .27
x
.60 =
Escort .07 .07 .21 .08
Miata .56 .26 .25 .10 .35

Priority matrix Criteria Weights

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Including Cost as a Decision Criteria
Adding “cost” as a a new criterion is very difficult in AHP. A new column
and a new row will be added in the evaluation matrix. However, whole
evaluation should be repeated since addition of a new criterion might
affect the relative importance of other criteria as well!

Instead one may think of normalizing the costs directly and calculate the
cost/benefit ratio for comparing alternatives!

Normalized Cost/Benefits
Cost Benefits Ratio
Cost
 CIVIC $12K .22 .30 0.73
 SATURN $15K .28 .27 1.03
 ESCORT $9K .17 .08 2.13
 MIATA $18K .33 .35 0.92

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Methods for including cost criterion

 Use graphical representations to make trade-offs.

40 Miata
35 Civic
30
Benefit

25
20
Saturn
15 Escort
10
5
0
0 5 10 15 20 25 30 35

Cost

 Calculate cost/benefit ratios

 Use linear programming
 Use seperate benefit and cost trees and then combine the results

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Complex decisions

•Many levels of criteria and sub-criteria exists for

complex problems.

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AHP Software:
Professional commercial software Expert Choice
developed by Expert Choice Inc. is available which
simplifies the implementation of the AHP’s steps and
automates many of its computations

 computations
 sensitivity analysis
 graphs, tables

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Ex 2: Evaluation of Job Offers

Ex: Peter is offered 4 jobs from Acme Manufacturing (A), Bankers Bank (B),
Creative Consulting (C), and Dynamic Decision Making (D).
He bases his evaluation on the criteria such as location, salary, job content,
and long-term prospects.

Step 1: Decide upon the relative importance of the selection criteria:

Location Salary Content Long-term

Location 1 1/5 1/3 1/2

Salary 5 1 2 4
Content 3 1/2 1 3
Long-term 2 1/2 1/3 1

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Priority Vectors:

1) Normalize the column entries by dividing each entry by the sum of the column.
2) Take the overall row averages

Location Salary Content Long-term Average

Location 0.091 0.102 0.091 0.059 0.086

Salary 0.455 0.513 0.545 0.471 0.496
Content 0.273 0.256 0.273 0.353 0.289
Long-term 0.182 0.128 0.091 0.118 0.130
+ +
1 1 1 1 1

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Example 2: Evaluation of Job Offers
Step 2: Evaluate alternatives w.r.t. each criteria

Location Scores Relative Location Scores

A B C D A B C D Avg.
A 1 1/2 1/3 5 A 0.161 0.137 0.171 0.227 0.174
B 2 1 1/2 7 B 0.322 0.275 0.257 0.312
C 3 2 1 9 C 0.484 0.549 0.514 0.409 0.293
D 1/5 1/7 1/9 1 D 0.032 0.040 0.057 0.045
0.489

0.044

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Example 2: Calculation of Relative Scores

Relative
weights Relative scores
Relative Scores for Each Criteria for each for each
Location Salary Content Long-Term criteria alternative
A 0.174 0.050 0.210 0.510 0.086 0.164
B 0.293 0.444 0.038 0.012 x 0.496 = 0.256
C 0.489 0.312 0.354 0.290 0.289 0.335
D 0.044 0.194 0.398 0.188 0.130 0.238

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 More about AHP: Pros and Cons
• It allows multi criteria decision making.

• It is applicable when it is difficult to formulate

Pros

criteria evaluations, i.e., it allows qualitative

evaluation as well as quantitative evaluation.

• It is applicable for group decision making

environments

•There are hidden assumptions like consistency. Users should be trained to use
Repeating evaluations is cumbersome. AHP methodology.

•Difficult to use when the number of criteria or Use GDSS

Use constraints to eliminate
Cons

alternatives is high, i.e., more than 7.

some alternatives
Use cost/benefit ratio if
•Difficult to add a new criterion or alternative applicable

•Difficult to take out an existing criterion or

alternative, since the best alternative might
differ if the worst one is excluded.

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Group Decision Making
The AHP allows group decision making, where group members can use their
experience, values and knowledge to break down a problem into a hierarchy
and solve. Doing so provides:

 Understand the conflicting ideas in the organization and try to reach a

consensus.
 Minimize dominance by a strong member of the group.
 Members of the group may vote for the criteria to form the AHP tree.
(Overall priorities are determined by the weighted averages of the
priorities obtained from members of the group.)

However;
The GDSS does not replace all the requirements for group decision making.
Open meetings with the involvement of all members are still an asset.

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 Example 3: AHP in project management
Prequalification Contractor A Contractor B Contractor C Contractor D Contractor E
of contractors 5 years experience 7 years experience 8 years experience 10 years experience 15 years experience
Experience
aims at the
Two similar projects One similar project No similar project Two similar projects No similar project
elimination of
incompetent Special procurement 1 international
experience project
contractors from
the bidding Financial $7 M assets $10 M assets $14 M assets $11 M assets $6 M assets
process. stability
High growth rate $5.5 M liabilities $6 M liabilities $4 M liabilities $1.5 M liabilities
Part of a group of Good relation with
No liability
companies banks
It is the choice of
Quality Good organization Average organization Good organization Good organization Bad organization
the decision performance
maker to C.M. personnel C.M. personnel C.M. team Good reputation Unethical techniques
eliminate Good reputation Two delayed projects Government award Many certi®cates
One project
terminated
contractor E Cost raised in some
from the AHP Many certi®cates Safety program Good reputation Average quality
projects
evalution since it Safety program QA/QC program
is not “feasible”
Manpower 150 labourers 100 labourers 120 labourers 90 labourers 40 labourers
at all !! resources
10 special skilled
200 by subcontract Good skilled labors 130 by subcontract 260 by subcontract
labourers
25 special skilled
Availability in peaks
labourers

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Example 3 (cont.’d)

Contractor A Contractor B Contractor C Contractor D Contractor E

Equipment 4 mixer
4 mixer machines 6 mixer machines 1 batching plant 2 mixer machines
resources machines
2 concrete
1 excavator 1 excavator 1 excavator 10 others
transferring trucks
2000 sf steel
15 others 1 bulldozer 2 mixer machines 9 others
formwork
6000 sf wooden
20 others 1 excavator
formwork
15,000 sf steel
1 bulldozer
formwork
16 others
17,000 sf steel
formwork
Current works 1 big project 2 projects ending 1 medium project 2 big projects 2 small projects
load ending (1 big+ 1 medium) started ending started
3 projects ending
2 projects in mid (1 2 projects ending 1 medium
(2 small + 1
medium +1 small) (1 big + 1 medium) project in mid
medium)

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Hierarchy Tree
Selecting the most
suitable contractor

Experience Financial Quality Manpower Equipment Current

Stability Performence Resources Resources workload

Contractor A Contractor B Contractor C Contractor D Contractor E

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Example 3: AHP in project management
Step 1: Evaluation of the weights of the criteria

Step 2: a) Pairwise comparison matrix for experience

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Example 3: AHP in project management
Calculation of priority vector:

x =

Probably Contractor-E should have been eliminated. It appears to be the worst.

Note that a DSS supports the decision maker, it can not replace him/her. Thus,
an AHP Based DSS should allow the decision maker to make sensitivity analysis of
his judgements on the overall priorities !

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Example AHP in supplier selection..(1)

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Example AHP in supplier selection ..(2)

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Multi Criteria Decision Making Models:
PROMETHEE
 One of the most efficient and easiest MCDM methodologies.
 Developed by Jean-Pierre Brans and Bertrand
Mareschal at the ULB and VUB universities since 1982
 Considers a set of criteria and alternatives. Criteria weights are
determined that indicate the relative importance
 Utilizes a function reflecting the degree of advantage of one
alternative over the other, along with the degree of disadvantage
that the same alternative has with respect to the other
alternative.
 In scaling, there are six options allowing the user to express
meaningful differences by minimum gaps between observations.
When type I is used, only relative advantage matters; type 6 is
based on standardization with respect to normal distribution.

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Ex: Media Selection for a Bicycle Co.
A bicycle manufacturing company is intending to advertise its products.

Six marketing actions are considered: Advertising in the international

newspaper, News; in the newspaper Herald; by mean of advertising boards in
large cities; of a personal mailing; by TV spots on channels CMM or NCB.

Units: Cost ($ 1,000), Target (10,000 people), Duration (days), Efficiency (0-100)
Manpower (# people involved in the company)

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Partial anf full rankings with
Promethee I and II

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Ranking of the
alternatives can be
obtained for the
selected weights

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Additional constraints
 It is often necessary that several alternatives have to be selected
subject to a set of goals.
 In this case an LP can be constructed with binary decision
variables, which gives the selection of r actions, among n
alternatives.
Let xi=1 if media i is selected and 0 otherwise, i=1,2,...,6.
φ(Ai) are the relative weight of media i, i=1,2,...,6.
Max φ(A1) x1 + … + φ(A6) x6

Subject to
x1 + x2 + x3 + x4 + x5 + x6 ≥ 2 (at least 2 media should be selected)
x1 + x2 + x3 + x4 + x5 + x6 ≤ 4 (at most 4 media should be selected.)
x1 + x2 = 1 (choose exactly one newspaper)
x5 + x6 = 1 ((choose exactly 1 TV channel)
625 x1 + 550 x2 + 250 x3 + 150 x4 + 175 x5 + 750 x6 ≥ 1200 (min. expected
return)
- 60 x1 - 30 x2 + 40 x3 + 92 x4 + 52 x5 + 80 x6 ≥ 0 (cost of advertising in
newspapers should be less than 50% of total costs)

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References

Al Harbi K.M.A.S. (1999), Application of AHP in Project Management, International

Journal of Project Management, 19, 19-27.

Haas R., Meixner, O., (2009) An Illustrated Guide to the Analytic Hierarchy Process,
Lecture Notes, Institute of Marketing & Innovation, University of Natural Resources,
retrieved from http://www.boku.ac.at/mi/ on October 2009.

Saaty, T.L., Vargas, L.G., (2001), Models, Methods, Concepts & Applications of the
Analytic Hierarchy Process, Kluwer’s Academic Publishers, Boston, USA.

Brans, J.P., Mareschal, B., (2010) “How to Decide with Promethee, retrieved from
http://www.visualdecision.com on October 2010.

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