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:

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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

S e lec ting
a N e w C ar

S tyle R e lia b ility F u e l E c on o m y

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  so as to lead to
max
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
2 1 4 0.60 = 1.60 = max
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
1.0
113

! 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

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.

 Calculate cost/benefit ratios

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

Miata
Civic

Saturn
Escort

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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 A 0.161 0.137 0.171 0.174
B 1/3 5 B 0.227
C 2 1 C 0.322 0.275 0.257 0.293
D 1/2 7 D 0.312
3 2 1 0.484 0.549 0.514 0.489
9 0.409
0.032 0.040 0.057 0.044
1/5 1/7
0.045
1/9 1

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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
D 0.044 0.194 0.398 0.188 0.289 0.335
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
AHP methodology.
Repeating evaluations is cumbersome.
Use GDSS
Use constraints to eliminate
Cons

•Difficult to use when the number of criteria or

some alternatives
alternatives is high, i.e., more than 7.
Use cost/benefit ratio if
applicable
•Difficult to add a new criterion or alternative

•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
of contractors
Contractor A Contractor B
5 years experience 7 years experience
Contractor C Contractor D
8 years experience 10 years experience
Contractor E
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
Quality Good organization Average organization Good organization Good organization Bad organization
of 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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