AHP-based approach

GROUP -9
Information System Analysis Assignment

to ERP system
selection

Divya Negi - MS19A008

Kriti Garg - MS19A021
Nikhil Raj - MS19A035
Pooja Kamble - MS19A014
Priya Rawat - MS19A043
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Key Steps in AHP
Process

TABLE OF CONTENTS
Key Steps in AHP Process..........................1
Type chapter title (level 2)......................2
Type chapter title (level 3) 3
An AHP example- Oliver Cole’s computer decision 4
Step 1: Weights for the criteria...............5
Step 2: Ratings for each decision alternative for each criteria 5
Hardware 6
Software 6
Vendor Support 6
Step 3: Weighted Average Rating for each decision alternative 5
An AHP example- 2

Oliver Cole’s computer

decision

Oliver Cole is looking for a new computer system for his small business.
 After multiple iterative discussions with his team members, he has determined
that the most important overall criteria while selecting a new computer for his
business are:
o Hardware
o Software
o Vendor support.
 Also, he has narrowed down his decision alternatives to three possible computer
systems, labeled as:
o SYSTEM-1
o SYSTEM-2
o SYSTEM-3
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Step 1: Weights for the criteria

The decision hierarchy for his computer selection has three different levels.
 The top level of the hierarchy describes the overall decision, which is to select
the best computer system for her small business.
 The middle level of the hierarchy describes the decision criteria that are to be
considered: hardware, software and vendor support.
 The lower level of the hierarchy reveals the alternative computer systems:
SYSTEM-1, SYSTEM-2 and SYSTEM-3.

Definition
Intensity of importance
1 Equal importance
3 Moderately important
5 Strong importance
7 Very Strong importance
9 Extremely importance
2,4,6,8 Intermediate value

Paired Comparison Judgement Matrix

  Hardware Software Vendor Support

Hardware 1 1/7 1/3
Software 7 1 3
Vendor Support 3 1/3 1
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Step 1: Normalize the comparison matrix

Column Sum
  Hardware Software Vendor Support
Hardware 1 1/7 1/3
Software 7 1 3
Vendor Support 3 1/3 1
Sum 11.00 1.48 4.33

Step 2: Normalize the comparison matrix

Divide each value by column sum & take row average (Priority Vector)
Average /
Hardware Software Vendor Support
  Priority Vector
Hardware 0.0909 0.0968 0.0769 0.0882
Software 0.6364 0.6774 0.6923 0.6687
Vendor Support 0.2727 0.2258 0.2308 0.2431
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In general, the Consistency Ratio (CR) is calculated as:

Consistency Ratio (CR) = Consistency Index (CI) / Random Index (RI)

In this case, n= 3 because three criteria are being compared, and so the Random Index (RI) equal to 0.58
(from the table) must be used. Therefore,
CR = CI / RI = 0.001 / 0.58 = 0.001

Step 2: Ratings for each decision

alternative for each criteria

Since CR<0.1 then we can say judgement is consistent otherwise inconsistent. Here,
judgement is consistent.
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Hardware

Paired Comparison Judgement Matrix

Hardware System 1 System 2 System 3

System 1 1 3 9
System 2 1/3 1 6
System 3 1/9 1/6 1

Step 1: Normalize the comparison matrix

Column Sum
Hardware System 1 System 2 System 3
System 1 1 3 9
System 2 1/3 1 6
System 3 1/9 1/6 1
Sum 1.44 4.17 16.00

Step 2: Normalize the comparison matrix

Divide each value by column sum & take row average (Priority Vector)
Average /
System 1 System 2 System 3
Hardware Priority Vector
System 1 0.6923 0.7200 0.5625 0.6583
System 2 0.2308 0.2400 0.3750 0.2819
System 3 0.0769 0.0400 0.0625 0.0598
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Step 3: Determine consistency ratio

b. Find λmax, Consistency Index (C.I.), Random Index (R.I.)
λmax 3.054
C.I 0.027
R.I 0.580

Step 4 Determine consistency ratio

Consistency Ratio (C.R.) = Consistency Index (C.I.)/ Random Index (R.I.)

C.R.hardware 0.0466

Since CR<0.1 then we can say judgement is consistent otherwise inconsistent. Here,
judgement is consistent.

Software
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Paired Comparison Judgement Matrix

Software System 1 System 2 System 3

System 1 1 1/2 1/7
System 2 2 1 1/5
System 3 7 5 1

Step 1: Normalize the comparison matrix

Column Sum
Software System 1 System 2 System 3
System 1 1 1/2 1/7
System 2 2 1 1/5
System 3 7 5 1
Sum 10.00 6.50 1.34

Step 2: Normalize the comparison matrix

Divide each value by column sum & take row average (Priority Vector)
Average /
System 1 System 2 System 3
Software Priority Vector
System 1 0.1000 0.0769 0.1064 0.0944
System 2 0.2000 0.1538 0.1489 0.1676
System 3 0.7000 0.7692 0.7447 0.7380
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Step 3: Determine consistency ratio

b. Find λmax, Consistency Index (C.I.), Random Index (R.I.)
λmax 3.014
C.I 0.007
R.I 0.580

Step 4 Determine consistency ratio

Consistency Ratio (C.R.) = Consistency Index (C.I.)/ Random Index (R.I.)
C.R.software 0.0122

Since CR<0.1 then we can say judgement is consistent otherwise inconsistent. Here,
judgement is consistent.
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Vendor Support
Paired Comparison Judgement Matrix

Vendor Support System 1 System 2 System 3

System 1 1 1 5
System 2 1 1 3
System 3 1/5 1/3 1

Step 1: Normalize the comparison matrix

Column Sum
Vendor Support System 1 System 2 System 3
System 1 1 1 5
System 2 1 1 3
System 3 1/5 1/3 1
Sum 2.20 2.33 9.00

Step 2: Normalize the comparison matrix

Divide each value by column sum & take row average (Priority vector)
Average /
System 1 System 2 System 3
Vendor Support Priority Vector
System 1 0.4545 0.4286 0.5556 0.4796
System 2 0.4545 0.4286 0.3333 0.4055
System 3 0.0909 0.1429 0.1111 0.1150
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Step 3: Determine consistency ratio

b. Find λmax, Consistency Index (C.I.), Random Index (R.I.)
λmax 3.029
C.I 0.015
R.I 0.580

Step 4 Determine consistency ratio

Consistency Ratio (C.R.) = Consistency Index (C.I.)/ Random Index (R.I.)

C.R.Vendor 0.0251
Since CR<0.1 then we can say judgement is consistent otherwise inconsistent. Here,
judgement is consistent.
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Step 3: Weighted Average Rating for each

decision alternative

Hardwar
Software Vendor Support Score
  e
  0.088 0.669 0.243 1.000
System 1 0.658 0.094 0.480 0.238
System 2 0.282 0.168 0.405 0.236
System 3 0.060 0.738 0.115 0.527 Highest

In the third and final phase, we determines the final scores for each
system by (a) multiplying the criteria weights (from Step 1) by the
ratings for the decision alternatives for each criteria (from Step 2); and
(b) summing the respective products.

SYSTEM-1: (0.082 x 0.663) + (0.682 x 0.087) + (0.236 x 0.499) =0.232

SYSTEM-2: (0.082 x 0.278) + (0.682 x 0.162) + (0.236 x 0.396) = 0.227
SYSTEM-3: (0.082 x 0.058) + (0.682 x 0.751) + (0.236 x 0.105) = 0.542

The computer with the highest score is chosen, i.e. SYSTEM-3 is the
“best” computer system for the new business.