Apply AHP in decision making

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This is our journal summary for AHP. I would like to apply AHP more often in my daily work. The AHP is very helpfull

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Apply AHP in decision making

  1. 1. Managerial Decision Analysis Journal SummaryAnalytic Hierarchy Process PREPARED BY : MOHD FARID AWANG NORHAIZUM SAHRIL KARTINI ABD MANAF NOR SAKINAH ABDUL EANICH
  2. 2. OUTLINE —  Background of AHP —  Development of AHP —  What is AHP? —  AHP process —  Application —  Advantages & Disadvantages —  Case study —  Conclusion
  3. 3. 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.    
  4. 4. 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.    
  5. 5. 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.
  6. 6. 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)
  7. 7. WHAT  IS  AHP?  Qualita? Quan?ta Decision   ve   ?ve   §  Addi;ve  Normaliza;on   PRIORITIES   §  Eigenvector   §  Geometric  Mean   Factor   Factor   Alterna?ve   Alterna?ve  
  8. 8. 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  
  9. 9. AHP  -­‐  EXAMPLE   GOAL   FACTOR   ALTERNATIVE  
  10. 10. Single  choice   decision   Quality   Mul;-­‐choice   Management   decision   APPLICATION   Ranking  Benchmarking   decision   Resource   Prio;za;on   alloca;on  
  11. 11. 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
  12. 12. 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
  13. 13. 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
  14. 14. 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  
  15. 15. 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.  
  16. 16. 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  
  17. 17. AHP  Model  for    Anugerah  Usahawan  Terengganu   The  Winner   Financial   Socio-­‐economy   Management   Co  A   Co  B   Co  C  
  18. 18. 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  
  19. 19. 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
  20. 20. 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  
  21. 21. FINAL  RESULT  84%  76%  74%  
  22. 22. 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    
  23. 23. 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.  

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