Managerial Decision Analysis Journal SummaryAnalytic Hierarchy Process PREPARED BY : MOHD FARID AWANG NORHAIZUM SAHRIL KARTINI ABD MANAF NOR SAKINAH ABDUL EANICH
OUTLINE Background of AHP Development of AHP What is AHP? AHP process Application Advantages & Disadvantages Case study Conclusion
AHP FOUNDER 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.
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 hewas a professor at the Wharton School of Business of theUniversity of Pennsylvania, an Ivy League university inPhiladelphia, 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 InternationalSymposium on the Analytic Hierarchy Process (ISAHP). The first conferenceheld in 1988 at Tianjin University, China. It brings together researchers, teachersand users of AHP and ANP to share their research and experiences in decisionmaking. 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? Quan?ta Decision ve ?ve § Addi;ve Normaliza;on PRIORITIES § Eigenvector § Geometric Mean Factor Factor Alterna?ve Alterna?ve
AHP PROCESS Step • Deﬁning the decision problem 1 Step • Developing a conceptual framework 2 Step • Semng up the decision hierarchy 3 Step • Collec?ng data from experts 4 Step • Employing the pair-‐wise comparison 5 Step • Es?ma?ng rela?ve weights of elements 6 Step • Calcula?ng the degree of consistency 7 Step • Calcula?ng the mean rela?ve weights 8
APPLICATION SINGLE CHOICE MULTI-CHOICE RANKING DECISION DECISION DECISION• Adopting an AHP • Integrated AHP • A study of bank to select Internet and entropy to selection decision advertising develop a durable in Singapore networks goods chain store using the AHP • AHP helps franchisee • Housing evaluate project selection model environment in India oil preferences of pipelines industry young consumers in Guangzhou, China • The AHP in project evaluation
APPLICATION (CONT..) RESOURCE PRIOTIZATION ALLOCATION • Going from six sigma • Using AHP to to design for six analyze the IT sigma: an exploratory outsourcing decision study using AHP • Information priority- setting for better resource allocation using AHP
APPLICATION (CONT..) BENCHMARKING QUALITY MANAGEMENT • Benchmarking facility • Choosing a quality management: applying AHP improvement project using• Benchmarking project the AHP management practices of • Evaluating the comparative Caribbean organizations service quality of using AHP supermarkets using the AHP• Marketing mix formulation for • Measuring the operational higher education performance of ICY using the AHP approach • Practical application of an AHP for the improvement of the warranty management
ADVANTAGES AND DISADVANTAGES ADVANTAGES DISADVANTAGES • StraighLorward and • Subjec;ve Evalua;on convenient -‐Conversion from verbal • Simplicity by using pair-‐ to numeric scale wise comparisons -‐Inconsistencies • Consistency in imposed by 1 to 9 scale evalua;on -‐Conﬂict between • Versa;lity 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
AHP Model for Anugerah Usahawan Terengganu The Winner Financial Socio-‐economy Management Co A Co B Co C
Applying AHP in ranking the 3 winners AHP MATRIX SOCIO-‐ECONOMY MANAGEMENT A 3 B 7 A 9 B 7 A 3 C 7 A 7 C 3 C 3 B 6 C 7 B 7 FINANCIAL SOCIO-‐ A 5 B 8 ECONOMY 7 MANAGEMENT 5 SOCIO-‐ A 3 C 9 ECONOMY 7 FINANCIAL 3 C 9 B 7 MANAGEMENT 5 FINANCIAL 3
MGT A B C Addi,ve Normalisa,on Method A 1 9/7 7/3 B 7/9 1 7/5 C 3/7 5/7 1 1.000 1.000 1.000 FINANCIAL A B C A 1 5/8 3/9 B 8/5 1 7/9 C 9/3 9/7 1 1.000 1.000 1.000 SOCIO-‐ECONOMY A B C A 1 3/7 3/7 B 7/3 1 6/3 C 7/3 3/6 1 1.000 1.000 1.000 CRITERIA Socio Mgt Finance Socio 1 7/5 7/3 Mgt 5/7 1 5/3 Fiance 3/7 3/5 1 1.000 1.000 1.000
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 CR : 0.006 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 CR : 0.013 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 CR : 0.042 CRITERIA PROFIT SUCCESS COST Total PrioritiesPROFIT 0.467 0.467 0.467 1.400 0.46667SUCCESS 0.333 0.333 0.333 1.000 0.33333COST 0.200 0.200 0.200 0.600 0.20000 1.000 1.000 1.000 3.000 1.000 CR : 0.002
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.