Logistics Decision Analysis Methods: Analytic Hierarchy Process
Logistics Decision Analysis Methods: Analytic Hierarchy Process
Logistics Decision Analysis Methods: Analytic Hierarchy Process
Classification of hierarchies
Construction of hierarchies
Establishing Priorities
The need for priorities
Setting priorities
Synthesis
Consistency
Interdependence
Advantages of the AHP
The AHP provides a single, easily
The AHP enables people to refine understood, flexible model for a
their definition of a problem and wide range Unityof unstructured
to improve their judgment and problems
The AHP integrates deductive and
understandingProcess
throughRepetition
repetition Complexity
systems approaches in solving
The AHP does not insist on complex problems
consensus but synthesizes a The AHP can deal with the
Judgment and Consensus Interdependence
interdependence of elements in a
representative outcome from
diverse judgments system and does not insist on
The AHP takes into consideration AHP linearAHP
The thinking
reflects the natural
the relative prioritiesTradeoffs
of factors in tendency of the mind to sort
Hierarchic
elements Structuring
of a system into
a system and enables people to
select the best alternative based different levels and to group like
on their goals elements in each level
Synthesis
The AHP leads to an overall The AHP provides a scale for
Measurement
estimate of the desirability of measuring intangibles and a
each alternative The AHP Consistency method for establishing priorities
tracks the logical
consistency of judgments
used in determining
priorities
Q&A
Hierarchy Development
The first step in the AHP is to develop a graphical
representation of the problem in terms of the overall
goal, the criteria, and the decision alternatives.
n 1 2 3 4 5 6 7 8 9 10
RI 0.00 0.00 0.58 0.90 1.12 1.24 1.32 1.41 1.45 1.49
Example: Inconsistency
Preferences: If, A B (2); B C (6)
Then, A C (should be 12) (actually 8)
Inconsistency
λ max n 3.019 3
CI 0.010
n 1 3 1
CI 0.010
CR 0.017 0.10
RI 0.58
The degree of consistency exhibited in the pairwise
comparison matrix for comfort is acceptable.
Development of Priority Ranking
The overall priority for each decision
alternative is obtained by summing the product
of the criterion priority (i.e., weight) (with
respect to the overall goal) times the priority
(i.e., preference) of the decision alternative
with respect to that criterion.
Ranking these priority values, we will have
AHP ranking of the decision alternatives.
Example:
Example: Priority Ranking – 0A
Step 0A: Other pairwise comparison matrices
Overall car A priority 0.398 (0.123) 0.085 (0.087) 0.218 (0.593) 0.299 (0.265) 0.265
Alternative Priority
Car B 0.421
Car C 0.314
Car A 0.265
Total 1.000
Hierarchies: A Tool of the Mind
Hierarchies are a fundamental tool of the human mind.
They involve identifying the elements of a problem,
grouping the elements into homogeneous sets, and
arranging these sets in different levels.
Complex systems can best be understood by breaking them
down into their constituent elements, structuring the
elements hierarchically, and then composing, or
synthesizing, judgments on the relative importance of the
elements at each level of the hierarchy into a set of overall
priorities.
Classifying Hierarchies
Hierarchies can be divided into two kinds: structural and
functional.
In structural hierarchies, complex systems are structured into
their constituent parts in descending order according to
structural properties (such as size, shape, color, or age).
Structural hierarchies relate closely to the way our brains analyze
complexity by breaking down the objects perceived by our senses into
clusters, subclusters, and still smaller clusters. (more descriptive)
Functional hierarchies decompose complex systems into their
constituent parts according to their essential relationships.
Functional hierarchies help people to steer a system toward a desired
goal – like conflict resolution, efficient performance, or overall
happiness. (more normative)
For the purposes of the study, functional hierarchies are the
only link that need be considered.
Hierarchy
Each set of elements in a functional hierarchy occupies a level
of the hierarchy.
The top level, called the focus, consists of only one element: the broad,
overall objective.
Subsequent levels may each have several elements, although their
number is usually small – between five and nine.
Because the elements in one level are to be compared with one another
against a criterion in the next higher level, the elements in each level must
be of the same order of magnitude. (Homogeneity)
To avoid making large errors, we must carry out clustering process. By
forming hierarchically arranged clusters of like elements, we can
efficiently complete the process of comparing the simple with the very
complex.
Because a hierarchy represents a model of how the brain analyzes
complexity, the hierarchy must be flexible enough to deal with that
complexity.
Types of Functional Hierarchy
Some functional hierarchies are complete, that is, all
the elements in one level share every property in the
nest higher level.
Some are incomplete in that some elements in a level
do not share properties.
Constructing Hierarchies - 1
One’s approach to constructing a hierarchy depends on the kind
of decision to be made.
If it is a matter of choosing among alternatives, we could start from the
bottom by listing the alternatives.
(decision alternatives => criteria => overall goal)
AHP
Tradeoffs Hierarchic Structuring
Synthesis Measurement
Consistency
Research Issues
Hierarchy construction
Method to deal with interdependence
Fuzziness in relationships among elements?
Priority setting
Scale vs. other scaling methods
How to make subjective judgment more objective
Application
Performance measurement via AHP vs. DEA
Network vs. hierarchic structure
How to deal with situation when subjective judgment depends
on relative weight of the criterion based?