THE ANALYTIC HIERARCHY PROCESS

Analytic Hierarchy Process

Analytic

Hierarchy Process (AHP) is a multicriteria decision-making system. AHP was developed by Thomas L. Saaty. It is used to solve complex decisionmaking problems. AHP has been applied in variety of decisions and planning projects in nearly 20 countries. AHP is implemented in the software of Expert Choice .

Typical application areas

Resource

allocation Hiring, evaluating and promoting employees TQM Strategic planning Relocation decisions Vendor selection Evaluating mergers and acquisitions

How widespread is its use?

IBM NASA

..a few of the thousands of organizations using AHP and EC

Goodyear IRS Ford Motor Co. FBI

Citibank Department of Defense

Xerox Boeing AT&T

World Bank Texaco Eastman Kodak

General Motors Inter-American Bank

A few of the many Universities using/teaching AHP/EC

Harvard University Colorado State University

Yale University MIT American University

University of Cambridge Duke University Purdue University

Naval War College Katz School of Business George Washington University Wharton School of Business Michigan State University Johns Hopkins University
Stanford University University of Maryland

Expert Choice (EC)

EC

helps you organize the various elements of a problem into a hierarchy. EC guides you in judging, via pair-wise comparisons, the relative importance of the objectives and the preference for the alternatives that you have defined. EC derives priorities by combining intangible information from your experience and intuition, and tangible information such as data.

Analytic Hierarchy Process

Step

1: Structure a hierarchy. Define the problem, determine the criteria and identify the alternatives.
Overall Goal Criteria
Decision Alternatives Select the Best Toothbrush Manufacturer

Cost
Cornell Brush Pik Picobuy

Reliability
Cornell Brush Pik Picobuy

Delivery Time
Cornell Brush Pik Picobuy

Analytic Hierarchy Process

Step

2: Make pairwise comparisons. Rate the relative importance between each pair of decision alternatives and criteria.

Analytic Hierarchy Process

Step

2 (contd): AHP uses 1-9 scale for the prioritization process. Numerical ratings 1 Verbal judgments Equally important (preferred)

3
5

Moderately more important

Strongly more important

7
9

Very strongly more important

Extremely more important

Analytic Hierarchy Process

Step

2 (contd): Intermediate numerical ratings of 2, 4, 6, and 8 can be assigned. If someone could not decide whether one criterion (alternative) is moderately more important than the other one or strongly more important than the other one, 4 (moderately to strongly more important) can be assigned.

Analytic Hierarchy Process

Step

3: Synthesize the results to determine the best alternative. Obtain the final results. The output of AHP is the set of priorities of the alternatives.

An Example with AHP

Choosing the most satisfied school

Goal:

To select the most satisfied school. Criteria: learning, friends, school life, vocational training, college prep. and music classes. Alternatives: School A, school B, and school C.

Hierarchy:

Goal Satisfaction with School

Learning

Friends

School Life

Vocational Training

College Prep.

Music Classes

School A

School B

School C

Pairwise comparisons:

School Selection
L 1 1/4 F 4 1 SL 3 7 1 5 5 6 VT 1 3 1/5 1 1 3 CP 3 1/5 1/5 1 1 1/3 MC Weights 4 .32 1 1/6 1/3 3 1 .14 .03 .13 .24 .14

Learning Friends School Life Vocational Trng. College Prep. Music Classes

1/3 1/7 1 1/3 1/4 1/3 5 1

Comparison of Schools with Respect to the Six Characteristics

Learning A B C A B C 1 3 2 1/3 1/2 1 1/3 3 1
Priorities

Friends A B C A B C 1 1 1 1 1 1 1 1 1

Priorities

School Life A B C A B C 1 1/5 1 5 1 5 1 1/5 1

Priorities

.16 .59 .25

.33 .33 .33

Priorities

.45 .09 .46

Priorities

Vocational Trng. Priorities

A A B C 1 1/9 1/7

B 9 1 5

C 7 1/5 1 .77 .05 .17 A B C

College Prep. A B C
1 2 1 1/2 1 1/2 1 2 1

Music Classes

A .25 .50 .25 A B C 1 1/6 1/4

B 6 1 3

C 4 1/3 1 .69 .09 .22

Composition and Synthesis

Impacts of School on Criteria

.32 L

.14 F .33 .33 .33

.03 SL .45 .09 .46

.13 VT .77 .05 .17

.24 CP .25 .50 .25

.14 MC .69 .09 .22

Composite Impact of Schools

A
B

.16 .59 .25

.37 .38 .25

School A: .16*.32+.33*.14+.45*.03+.77*.13+.25*.24+.69*.14= .37

Overall final outcome

School

B is the best school with an overall priority of 0.38, followed by school A.