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Transcript of AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective...
![Page 1: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/1.jpg)
AHP - 1Dr. Chen – Business Intelligence
Analytical Hierarchy Process (AHP): A Multi-Objective Decision
Making Technique
Jason C.H. Chen, Ph.D.Professor of MIS
School of BusinessGonzaga UniversitySpokane, WA 99258
BUSINESS PERFORMANCE MANAGEMENT
![Page 2: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/2.jpg)
AHP - 2Dr. Chen – Business Intelligence
Analytical Hierarchy Process
• In many situations one may not be able to assign weights to the different decision factors. Therefore one must rely on a technique that will allow the estimation of the weights.
• What is a solution?• One such process, The Analytical Hierarchy
Process (AHP), involves pairwise comparisons between the various factors.
![Page 3: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/3.jpg)
AHP - 3Dr. Chen – Business Intelligence
Analytical Hierarchy Process (cont.)
• The process is started by the decision maker creating the value tree associated with the problem.
• Then proceed by carrying out pairwise comparisons, both between– Alternatives on each factor, and– Factors at a given node.
![Page 4: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/4.jpg)
AHP - 4Dr. Chen – Business Intelligence
Application Case of AHP
• Jane is about to graduate from college and is trying to determine which job offer to accept. She plans to choose between three offers by determining how well each offer meets the following criteria (objectives):
– High starting salary– Quality of life in city where job is located– Interest of work– Nearness of job to family
![Page 5: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/5.jpg)
AHP - 5Dr. Chen – Business Intelligence
Assumptions
• Jane has hard time in prioritizing those criteria. In other words, she needs to find one way to decide the weights for those criteria. AHP provides such a function.
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AHP - 6Dr. Chen – Business Intelligence
Determine the problem
• What job offer will give Jane possibly highest satisfaction?
• Structure the hierarchy by putting the top objective (satisfaction with job), criteria, and alternatives as follows.
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AHP - 7Dr. Chen – Business Intelligence
Satisfaction with a Job
Job A Job B Job C
Structure of the Problem
Starting Salary
Life Quality InterestNearness to
Family
criteria; n=4
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AHP - 8Dr. Chen – Business Intelligence
Satisfaction with a Job
Starting Salary
Life Quality InterestNearness to
Family
Job A Job B Job C
Structure of the Problem
Web site:http://www.hipre.hut.fi/
![Page 9: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/9.jpg)
AHP - 9Dr. Chen – Business Intelligence
The Principle of the AHP …
• The principle of the AHP relies on the pairwise comparison. This comparison is carried out using a scale from 1 to 9 as follows:– 1 Equally preferred– 2 Equally to Moderately preferred– 3 Moderately preferred– 4 Moderately to Strongly preferred– 5 Strongly preferred– 6 Strongly to Very Strongly preferred– 7 Very Strongly preferred– 8 Very to Extremely Strongly preferred– 9 Extremely preferred
![Page 10: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/10.jpg)
AHP - 10Dr. Chen – Business Intelligence
A pairwise comparison matrix for the criteria level
12/124/1
2122/1
2/12/115/1
4251
Nearness
Interest
Quality
Salary
NearnessInterestQualitySalarySatisfaction with a Job
We assume that “Starting Salary” is strongly more important than “Life Quality”. That is why 5 is entered into the Salary row and Quality column.
Compared to Interest, Salary is just a little bit more important. That is why 2 is entered into Salary row and Quality column.
Similarly, Salary is moderately to strongly preferred than “Nearness”. That is why 4 is entered into the Salary row and Nearness column.
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AHP - 11Dr. Chen – Business Intelligence
A pairwise comparison matrix for the criteria level
12/124/1
2122/1
2/12/115/1
4251
Nearness
Interest
Quality
Salary
NearnessInterestQualitySalarySatisfaction with a Job
Web site:http://www.hipre.hut.fi/
Since n=4, there are 6 [n*(n-1)/2] judgments required to develop each matrix. Why?
![Page 12: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/12.jpg)
AHP - 12Dr. Chen – Business Intelligence
12/14/1
212/1
4211
CJob
BJob
AJob
CJobBJobAJobSALARY
A
Using the same steps of 3 and 4 (see handout) to determine the score of each alternative on each criterion. Take the first criterion “Salary” as an example. One pairwise matrix is constructed as follows (details see step 4 on the handout):
In terms of criterion of “Salary”, Job A is moderately important (“2”) than Job B. However, Job A is essentially
more important (“4”) than Job C.
![Page 13: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/13.jpg)
AHP - 13Dr. Chen – Business Intelligence
133
3/112
3/12/112
CJob
BJob
AJob
CJobBJobAJobQuality
A
The next two pairwise matrices (for “Life Quality” and “Interest”) are as follows (see step#6 on the handout):
13/13
317
3/17/113
CJob
BJob
AJob
CJobBJobAJobInterest
A
![Page 14: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/14.jpg)
AHP - 14Dr. Chen – Business Intelligence
127
14
7/14/11
2/14
CJob
BJob
AJob
CJobBJobAJobNearness
A
The last pairwise matrix (for “Nearness to family”) is listed below:
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AHP - 15Dr. Chen – Business Intelligence
0159.03
40477.4
1.. max
n
nIC
Consistency Index (C.I) is computed as follows (see handout, p.5)
We then compare the value of C.I. to the value of random index (R.I). If the ratio of C.I. to R.I. is less than 10%, then we can say the judgment process is relatively consistent and the matrix is acceptable. Otherwise, the decision maker may need to re-examine the judgment process and re-compare criteria or alternatives. The consistency ratio (C.R.) is computed as follows:
How to verify that the data entered in the comparison matrices is acceptable
C.R. = C.I. / R.I. = 0.0159/0.9 = 0.0176666 = 1.7% < 10%
n 2 3 4 5 6 7 8 9 10R.I. 0 .58 .90 1.12 1.24 1.32 1.41 1.45 1.51
Random Indices (R.I.) for Consistency Check
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AHP - 16Dr. Chen – Business Intelligence
12/14/1
212/1
4211
CJob
BJob
AJob
CJobBJobAJobSALARY
A
133
3/112
3/12/112
CJob
BJob
AJob
CJobBJobAJobQuality
A
13/13
317
3/17/113
CJob
BJob
AJob
CJobBJobAJobInterest
A
127
14
7/14/11
2/14
CJob
BJob
AJob
CJobBJobAJobNearness
A
12/124/1
2122/1
2/12/115/1
4251
Nearness
Interest
Quality
Salary
NearnessInterestQualitySalarySatisfaction with a Job
![Page 17: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/17.jpg)
AHP - 17Dr. Chen – Business Intelligence
We will open an existing model
http://www.hipre.hut.fi
or
http://hipre.aalto.fi/
File name: mbus673.jmd
![Page 18: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/18.jpg)
AHP - 18Dr. Chen – Business Intelligence
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AHP - 19Dr. Chen – Business Intelligence
Scroll down
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AHP - 20Dr. Chen – Business Intelligence
double clickDouble
click
Display the “weights” entered in the “Goal” or “Criteria”1) Double click or 2) Select an “Element” then click Priorities then AHP
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AHP - 21Dr. Chen – Business Intelligence
(p.4 of Handout)
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AHP - 22Dr. Chen – Business Intelligence
Result from double clicking “salary”
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AHP - 23Dr. Chen – Business Intelligence
Result from double clicking “life quality”
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AHP - 24Dr. Chen – Business Intelligence
Result from double clicking “interest”
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AHP - 25Dr. Chen – Business Intelligence
Result from double clicking “nearness to family”
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AHP - 26Dr. Chen – Business Intelligence
click
Perform Analysis
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AHP - 27Dr. Chen – Business Intelligence
Perform Analysis
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AHP - 28Dr. Chen – Business Intelligence
Result from “Analysis of Composite Priorities … “
click
According to the BAR chart, AHP suggests that Jane should take Job B. Why?
![Page 29: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/29.jpg)
AHP - 29Dr. Chen – Business Intelligence
Result from “Analysis of Composite Priorities … “ – with Values
According to the “Values”, AHP suggests that Jane should take Job B (you need to “Add total” , see the next slide)
![Page 30: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/30.jpg)
AHP - 30Dr. Chen – Business Intelligence
Result as Text Value Tree0 satisfaction with a job 1 salary 0.512 2 job A 0.571 2 job B 0.286 2 job C 0.143 1 life quality 0.098 2 job A 0.163 2 job B 0.540 2 job C 0.297 1 interest 0.244 2 job A 0.088 2 job B 0.669 2 job C 0.243 1 nearness to family 0.146 2 job A 0.082 2 job B 0.315 2 job C 0.603 Composite Priorities job A job B job C salary 0.293 0.146 0.073 life quali 0.016 0.053 0.029 interest 0.021 0.163 0.059 nearness t 0.012 0.046 0.088 Overall 0.342 0.408 0.249
1429.0
2857.0
5714.0
1S
2971.0
5409.0
1633.0
2S
2431.0
6687.0
0882.0
3S
6025.0
3151.0
0824.0
4S
step 7 (p.5)
![Page 31: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/31.jpg)
AHP - 31Dr. Chen – Business Intelligence
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AHP - 32Dr. Chen – Business Intelligence
Your Turn -- Try It!
http://www.hipre.hut.fi
![Page 33: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/33.jpg)
AHP - 33Dr. Chen – Business Intelligence
How to create an AHP model for “a Job Selection.”
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AHP - 34Dr. Chen – Business Intelligence
Double click a node (element) will appear
Enter a nameGoal level
Criteria level
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AHP - 35Dr. Chen – Business Intelligence
Edit the element’s Name (only if needed)
Select this
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AHP - 36Dr. Chen – Business Intelligence
Steps of creating “Links”
1. Left click
2. Right click
Complete the remaining links
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AHP - 37Dr. Chen – Business Intelligence
Steps of creating “Links” (cont.)
1. Left click2. Right click
Complete the remaining links between “Criteria” and Alternatives”
Labels are changed
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AHP - 38Dr. Chen – Business Intelligence
Steps of creating “Links” – Final Model (cont.) Labels are changed
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AHP - 39Dr. Chen – Business Intelligence
Be sure that to save the model now (and periodically).
Enter “filename”
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AHP - 40Dr. Chen – Business Intelligence
Enter “filename”
A “filename” is saved
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AHP - 41Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors
• Goal level (satisfaction with job)• Criteria level (salary, life quality, interest,
and nearness to family)
![Page 42: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/42.jpg)
AHP - 42Dr. Chen – Business Intelligence
Double Left click
Steps of assigning weights to different decision factors
Click on “AHP”
We will first enter “pairwise comparison matrix” for the
“Criteria” level
![Page 43: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/43.jpg)
AHP - 43Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
Drag the bar or enter a number
“Starting Salary” is strongly more important than “Life Quality”. That is why 5 is entered into the Salary row and Quality column.
![Page 44: AHP - 1 Dr. Chen – Business Intelligence Analytical Hierarchy Process (AHP): A Multi-Objective Decision Making Technique Jason C.H. Chen, Ph.D. Professor.](https://reader035.fdocuments.us/reader035/viewer/2022081519/56649f335503460f94c50235/html5/thumbnails/44.jpg)
AHP - 44Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
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AHP - 45Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
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AHP - 46Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
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AHP - 47Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
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AHP - 48Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
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AHP - 49Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
Click OK when done
This completes “pairwise comparison matrix” for the “Goal” level (i.e., “Satisfaction with a Job”)
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AHP - 50Dr. Chen – Business Intelligence
Double left click
Steps of assigning weights to different decision factors (cont.)
Next, to complete “pairwise comparison matrix” for the “Criteria” level of “Salary”)
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AHP - 51Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
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AHP - 52Dr. Chen – Business Intelligence
Steps of assigning weights to different decision factors (cont.)
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AHP - 53Dr. Chen – Business Intelligence
Perform Analysis
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AHP - 54Dr. Chen – Business Intelligence
Result from “Analysis of Composite Priorities … “
click
According to the BAR chart, AHP suggests that Jane should take Job B
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AHP - 55Dr. Chen – Business Intelligence
Result from “Analysis of Composite Priorities … “ – with Values
According to the “Values”, AHP suggests that Jane should take Job B (you need to “Add total” , see the next slide)
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AHP - 56Dr. Chen – Business Intelligence
Result as Text Value Tree0 satisfaction with a job 1 salary 0.512 2 job A 0.571 2 job B 0.286 2 job C 0.143 1 life quality 0.098 2 job A 0.163 2 job B 0.540 2 job C 0.297 1 interest 0.244 2 job A 0.088 2 job B 0.669 2 job C 0.243 1 nearness to family 0.146 2 job A 0.082 2 job B 0.315 2 job C 0.603 Composite Priorities job A job B job C salary 0.293 0.146 0.073 life quali 0.016 0.053 0.029 interest 0.021 0.163 0.059 nearness t 0.012 0.046 0.088 Overall 0.342 0.408 0.249
1429.0
2857.0
5714.0
1S
2971.0
5409.0
1633.0
2S
2431.0
6687.0
0882.0
3S
6025.0
3151.0
0824.0
4S
step 7 (p.5)
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AHP - 57Dr. Chen – Business Intelligence
Save your work again
click
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AHP - 58Dr. Chen – Business Intelligence
Have a fun!
http://www.hipre.hut.fi
File name: mbus673.jmd
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AHP - 59Dr. Chen – Business Intelligence
• The following slides might be skipped.
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AHP - 60Dr. Chen – Business Intelligence
Sensitivity Analysis
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AHP - 61Dr. Chen – Business Intelligence