ADDIS ABABA UNIVERSITY

SCHOOL OF COMMERCE

GRADUATE PROGRAM

MULTI CRITERIA DECISION MAKING

ANALYTICAL HIERARCHY PROCESS

(THE CASE OF ZEBIDAR BREWERY Sc)

Submitted to: Matiwos Ensermu (Ph.D.)

By: Yaregal Lakew

Wolde Wodaje
Tsigie Ambaye
Mesfin Asmamaw
Sidrak Zewdu

Addis Ababa
May, 2017
 Modelling and IT Application in SCM

Table of Contents
1. INTRODUCTION......................................................................................................................2

2. PURPOSE OF THE ASSIGNMENT................................................................................................3

3. MULTI CRITERIA DECISION MAKING - THE ANALYTICAL HIERARCHY PROCESS...........................3

4. METHODOLOGY........................................................................................................................4

5. DISCUSSION AND ANALYSIS......................................................................................................5

5.1 DEVELOP A PAIRWISE COMPARISON MATRIX FOR EACH LOCATION AGAINST EACH CRITERION.............................5
5.2 SYNTHESIZATION...............................................................................................................................7
5.2.1 SUM UP THE VALUES IN EACH COLUMN OF THE PAIRWISE COMPARISON.......................................................7
5.2.2 DIVIDE EACH VALUE IN EACH COLUMN OF THE PAIRWISE COMPARISON MATRICES BY THE CORRESPONDING
COLUMN SUM AND GET THE BELOW NORMALIZED MATRICES.................................................................................8
5.2.3 AVERAGE THE VALUES, CONVERTED IN DECIMALS, IN EACH ROW OF THE NORMALIZED MATRICES TO HAVE THE SO
CALLED PREFERENCE VECTORS.........................................................................................................................9
5.2.4 COMBINE THE VECTORS OF PREFERENCES FOR EACH CRITERION, FROM ABOVE, INTO ONE PREFERENCE MATRIX
THAT SHOWS THE PREFERENCE FOR EACH LOCATION FOR EACH CRITERION..............................................................10

6. RANKING THE CRITERIA..........................................................................................................11

6.1 DEVELOP A PAIRWISE COMPARISON MATRIX FOR THE CRITERIA.................................................................11

6.2 COMPUTE THE NORMALIZED MATRIX BY DIVIDING EACH VALUE IN EACH COLUMN OF THE MATRIX BY THE
CORRESPONDING COLUMN SUM....................................................................................................................12
6.3 DEVELOP THE PREFERENCE VECTOR BY COMPUTING THE ROW AVERAGES FOR THE NORMALIZED MATRIX..........12
6.4 OVERALL SCORE.............................................................................................................................13
6.5 CHECKING THE ANALYTICAL HIERARCHY PROCESS CONSISTENCY...............................................................14
6.5.1 MULTIPLY THE PAIRWISE COMPARISON FOR EACH OF THE CRITERIA BY THE PREFERENCE VECTOR FOR THE CRITERIA
AND SUM THE PRODUCTS.............................................................................................................................15
6.5.2 DIVIDE THE RESULTS ABOVE BY THE CORRESPONDING VALUES FROM THE PREFERENCE VECTOR AND COMPUTE THE
AVERAGE AND SUM OF THE RESULTS...............................................................................................................15
6.5.3 COMPUTE THE CONSISTENCY INDEX AS SHOWN BELOW..........................................................................16
6.5.4 CHECK IF THE LEVEL OF INCONSISTENCY IS ACCEPTABLE...........................................................................16
7. RESULTS AND RECOMMENDATIONS........................................................................................17

8. FEED BACK FROM THE COMPANY............................................................................................17

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1. Introduction
Zebidar’s Brewery S.C. plant is located some 168 km away from Addis Ababa in Gubreye
town near Wolkite. The brewery company was named after the mountain “Zebidar” that is
found in Gurage Zone, the same zone where the factory is established.

Zebidar is established by a joint venture between a Belgian Beer Company called Unibra,
and a local business owner called Jemar. The company launched its first products in January
2017 and hence is an infant to the beer market in Ethiopia. It is now working hard to claim
reasonable amount of share in the Ethiopian market.

Zebidar aimed to produce 350,000 hectoliter (hl) of beer per year and deliver it to
primarily targeted markets in Addis Ababa and the Southern part of Ethiopia. As part of
expansion plan and need to be more accessible, Zebidar found it difficult to deliver its
products only from the plant. Currently, the company is trying to address its clients’ needs
by supplying its products from the plant as well as from a distribution center (depot) that is
found in Addis Ababa. For that matter, the company rented a warehouse in Addis Ababa and
is using it as a distribution center.

This year, the foreign business partner, which is Unibra, has sold its major shares to BGI
Ethiopia and hence the company takes a new status in terms of new administration, board
of directors and even its business structure. The new management is planning to boost the
factory’s production from 350,000 hl per year to 650,000 hl per year and also planning a
strategy to reach out markets all over Ethiopia which has not been the case before.

Accordingly, the new management need to assess the significance of the Addis Ababa
distribution Center (Depot) and want to relocate its distribution center to other parts of
Ethiopia if that is found to be worth considering. The Distribution Manager is in charge of
assessing the case and suggest another potential site to relocate the depot. We contacted
this person in charge through one of our group member, who works for the same company
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under discussion, and assist on making the relocation decision through scientific model
analysis. When we shared the idea of scientific decision-making support tools with the
distribution manager, he happily accepted it and asked us to assess the situation and report
the results back to him so that he will recommend the best option to the top management.

The appropriate model we chose and applied to help out on this decision is the Multi
criteria decision making tool specifically the Analytical Hierarchy Process (AHP) model.

The objective of the study therefore is to apply the AHP model and advise which location is
best to be used as a depot and also rank the rest of the locations.

2. Purpose of the Assignment

Group members are second year masters students of the Logistics and Supply chain
management department in Addis Ababa University School of Commerce. The assignment
was given to the group members as a partial fulfilment of the completion of the course
entitled Modelling and IT application in Supply Chain Management. The assignment
requires us to practically apply the scientific model in making important decisions in any
organization we choose so that we will have a clear understanding of the model we use in
specific and about the course in general. So, the purpose of the assignment is purely for
academic reason.

3. Multi Criteria Decision making -

The Analytical Hierarchy Process
Decision-making is an integral part of modern management. Essentially, Rational or sound
decision making is taken as primary function of management. Every manager takes
hundreds and hundreds of decisions subconsciously or consciously making it as the key
component in the role of a manager. Decisions play important roles as they determine both

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organizational and managerial activities. A decision can be defined as a course of action

purposely chosen from a set of alternatives to achieve organizational or managerial
objectives or goals. Decision making process is continuous and indispensable component of
managing any organization or business activities. Decisions are made to sustain the
activities of all business activities and organizational functioning.
(https://www.managementstudyguide.com/what-is-decision-making.htm)

Consequently, managers at any level are expected to make rational decisions to ensure that
organization are sustainable and function as intended. To do so, managers need to have
relatively comprehensive information about all the circumstances and the environment that
have impact on the decision. The information gathered can either be qualitative or
quantitative, that can be expressed in figures. Analyzing the information very well will help
managers to make rational and optimum decisions and choose the most viable option out
of the possible alternatives. Most of the time, decisions need to be made in view of different
conditions that have their own constraints which the manager should choose the best one
in favor of the organization. However, it is difficult to simply look at the decision criteria
and make a decision without applying a scientific model. Scientific models are designed to
support managers by analyzing the criteria for the decision and qualitatively recommend
the best option.

One of the Multi Criteria Decision Making models, The Analytical Hierarchy Process (AHP),
developed by Thomas Saaty, is a method for ranking decision alternatives and selecting the
best one when the decision maker has multiple objectives, or criteria, on which to base the
decision. By developing a numeric score to rank each decision alternative, the model
answers the question which one is best, as most of the time the decision maker has multiple
criteria to make a single decision.

4. Methodology
We paid a visit to the factory’s head office located around Kality and had a face to face
discussion and interview with the distribution manager of Zebidar Brewery Factory S.C.

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The manager listed out the alternative locations that the company wants to relocate the
Addis Ababa depot and the criteria based on which the factory wants to choose from those
locations. Accordingly, we have developed a pairwise matrix by which the manager
compared the alternatives and gave scores based on the preference scale for pairwise
comparisons. It was these data that we have used for computations throughout this paper.
All the Analytical Hierarchy Process (AHP) steps were suitably followed to reach out to the
results and made recommendations in the end to the distribution manager.

5. Discussion and Analysis

The distribution manger identified six sites, namely, Hawassa, Bahir Dar, Dire Dawa,
Nekemtie, Dessie and Addis Ababa itself. In the meantime, the basis for selection among
these sites is the criteria listed as; Market Potential, Level of Competition, Transportation
cost (distance), and facility cost (warehouse). Having the information above, we have
advised the distribution manager to qualitatively score the locations and the criteria based
on his own judgement using the preference level from the pairwise comparison scale which
we later on converted into numeric values from the same scale. We have shared the below
pairwise preference scale with the distribution manger so that he refers the scale as he
does scoring the locations against each criterion.

Table 1. Pair wise Comparison Preference scale

Preference Level Numeric Value

Equally preferred 1
Equally to moderately preferred 2
Moderately preferred 3
Moderately to strongly preferred 4
Strongly preferred 5
Strongly to very strongly preferred 6
Very strongly preferred 7
Very strongly to extremely preferred 8
Extremely preferred 9

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5.1 Develop a pairwise comparison matrix for each location against each
criterion

Developing a pairwise comparison matrix using a preference scale is the first step in the
Analytical Hierarchy Process. The below matrix shows the summarized comparison made
for the locations against each criterion for location selection.

Table 2. Pairwise comparison for Infrastructure (Criterion 1)

Location Addis Ababa Hawassa jima mekele Bahir Dar
Addis Ababa 1 2 4 3 5
Hawassa 1/2 1 3 4 2
Jima 1/4 1/3 1 2 4
Mekele 1/3 1/4 1/4 1 5
Bahir Dar 1/5 1/2 1/5 1/5 1
Table 3. Pairwise comparison for market share (Criterion 2)
Location Addis Ababa Hawassa Jima mekele Bahir Dar
Addis Ababa 1 4 6 3 5
Hawassa 1/4 1 2 7 4
Mekele 1/6 1/2 1 8 2
Jima 1/3 1/7 1/8 1 3
Bahir Dar 1/5 1/4 1/2 1/3 1

Table 4. Pairwise comparison for Income level (Criterion 3)

Location Addis Ababa Hawassa jima Mekele Bahir Dar

Addis Ababa 1 5 4 2 3
Hawassa 1/5 1 3 6 2
Jima 1/4 1/3 1 3 5
Mekele 1/2 1/6 1/4 1 4
Bahir Dar 1/3 1/2 1/5 ¼ 1

Table 5. Pairwise comparison for Logistics cost (Criterion 4)

Location Addis Ababa Hawassa jima Mekele Bahir Dar

Addis Ababa 1 3 2 4 2
Hawassa 1/3 1 4 6 8
Jima 1/2 1/4 1 3 3
Mekele 1/4 1/6 1/2 1 2

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Bahir Dar 1/2 1/8 1/3 ½ 1

5.2 Synthesization

The second mathematical step to arrive at the AHP recommended decision is called
Synthesization. Synthesizing the values has some simple steps which we will separately
discuss and apply below.

5.2.1 Sum up the values in each column of the pairwise comparison

Table 6. Infrastructure (Criterion 1)

Location Addis Ababa Hawassa jima mekele Bahir Dar
Addis Ababa 1 2 4 3 5
Hawassa ½ 1 3 4 2
Jima ¼ 1/3 1 2 4
Mekele 1/3 1/4 1/4 1 5
Bahir Dar 1/5 1/2 1/5 1/5 1
SUM 274/120 49/12 169/20 51/5 17

Table 7. Pairwise comparison for market share (Criterion 2)

Location Addis Ababa Hawassa Jima mekele Bahir Dar
Addis Ababa 1 4 6 3 5
Hawassa ¼ 1 2 7 4
Mekele 1/6 1/2 1 8 2
Jima 1/3 1/7 1/8 1 3
Bahir Dar 1/5 1/4 1/2 1/3 1
Sum 117/60 165/28 77/8 58/3 15

Table 7. Pairwise comparison for Income level (Criterion 3)

Location Addis Ababa Hawassa jima Mekele Bahir Dar

Addis Ababa 1 5 4 2 3
Hawassa 1/5 1 3 6 2
Jima 1/4 1/3 1 3 5
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Mekele 1/2 1/6 1/3 1 4

Bahir Dar 1/3 1/2 1/5 ¼ 1
Sum 137/60 42/6 128/15 49/4 15

Table 8. Pairwise comparison for Logistics cost (Criterion 4)

Location Addis Ababa Hawassa jima Mekele Bahir Dar

Addis Ababa 1 3 2 4 2
Hawassa 1/3 1 4 6 8
Jima 1/2 1/4 1 3 3
Mekele 1/4 1/6 1/2 1 2
Bahir Dar 1/2 1/8 1/3 ½ 1
Sum 31/12 109/24 47/6 29/2 16

5.2.2 Divide each value in each column of the pairwise comparison matrices by
the corresponding column sum and get normalized matrices

Table 10. Normalized Matrix for Infrastructure (Criterion 1)

Location Addis Ababa Hawassa jima mekele Bahir Dar

Addis Ababa 120/274 24/49 80/169 15/51 5/17
Hawassa 120/548 12/49 60/169 20/51 2/17
Jima 120/1096 4/49 20/169 10/51 4/17
Mekele 120/822 3/49 20/676 5/51 5/17
Bahir Dar 120/1370 6/49 20/845 5/255 1/17
SUM 1 1 1 1 1

Table 11. Normalized Matrix for Pairwise comparison for market share (Criterion 2)
Location Addis Ababa Hawassa Jima mekele Bahir Dar
Addis Ababa 60/117 112/165 48/77 9/58 5/15
Hawassa 60/468 28/165 16/77 21/58 4/15
Mekele 60/702 28/330 8/77 24/58 2/15
Jima 60/351 28/1155 8/616 3/58 3/15
Bahir Dar 60/585 28/660 8/154 3/174 1/15
Sum 1 1 1 1 1
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Table 12. Normalized Matrix for Pairwise comparison for Income level (Criterion 3)

Location Addis Ababa Hawassa jima Mekele Bahir Dar

Addis Ababa 60/137 30/42 60/128 8/49 3/15
Hawassa 60/685 6/42 45/128 24/49 2/15
Jima 60/548 6/126 15/128 12/49 5/15
Mekele 60/274 6/252 15/384 4/49 4/15
Bahir Dar 60/411 6/84 15/640 4/196 1/15
Sum 1 1 1 1 1

Table 13. Normalized Matrix Pairwise comparison for Logistics cost (Criterion 4)

Location Addis Ababa Hawassa jima Mekele Bahir Dar

Addis Ababa 12/31 72/109 12/47 8/29 2/16
Hawassa 12/93 24/109 24/47 12/29 8/16
Jima 12/62 24/436 6/47 6/29 3/16
Mekele 12/124 4/654 6/94 2/29 2/16
Bahir Dar 12/62 4/872 6/141 2/58 1/16
Sum 1 1 1 1 1

5.2.3 Average the values, converted in decimals, in each row of the

normalized matrices to have the so-called preference vectors

Location Addis Ababa Hawassa jima mekele Bahir Dar Row

avarege
Addis Ababa 0.4379 0.4898 0.4734 0.2941 0.2941 0.2999
Hawassa 0.2189 0.2449 0.3550 0.3922 0.1176 0.2657
Jima 0.1095 0.0816 0.1183 0.1960 0.2353 0.1481
Mekele 0.1459 0.0612 0.0296 0.0980 0.2941 0.1258
Bahir Dar 0.0876 0.1224 0.0236 0.0196 0.0588 0.0624
SUM 1 1 1 1 1 1

Table 14. Normalized Matrix with row average for market share (Criterion 2)
Location Addis Ababa Hawassa Jima mekele Bahir Dar Row
average
Addis Ababa 60/117 112/165 48/77 9/58 5/15
Hawassa 60/468 28/165 16/77 21/58 4/15
Mekele 60/702 28/330 8/77 24/58 2/15
Jima 60/351 28/1155 8/616 3/58 3/15
Bahir Dar 60/585 28/660 8/154 3/174 1/15

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Sum 1 1 1 1 1

Normalized Matrix with row average for Logistics cost (Criterion 4)

Location Addis Ababa Hawassa jima Mekele Bahir Dar Row

averege
Addis Ababa 0.3870 0.6605 0.2553 0.553 0.1250 0.3451
Hawassa 0.1290 0.2201 0.5106 0.4137 0.5000 0.3546
Jima 0.1935 0.0550 0.0638 0.2068 0.1875 0.0999
Mekele 0.0967 0.0366 0.0628 0.0698 0.1250 0.0781
Bahir Dar 0.1935 0.0275 0.0425 0.0344 0.0625 0.0720
Sum 1 1 1 1 1 1

Table 15. Normalized Matrix with row average for Transportation cost (Criterion 3)

Location Addis Ababa Hawassa Bahir Dar Dire Dawa Nekemtie Dessie Averages
Addis Ababa 0.5398 0.7282 0.3684 0.3784 0.4348 0.4045 0.4757
Hawassa 0.1080 0.1456 0.2105 0.3243 0.3478 0.3371 0.2456
Bahir Dar 0.0771 0.0364 0.0526 0.0270 0.0435 0.0225 0.0432
Dire Dawa 0.0771 0.0243 0.1053 0.0541 0.0435 0.0337 0.0563
Nekemtie 0.1080 0.0364 0.1053 0.1081 0.0870 0.1348 0.0966
Dessie 0.0900 0.0291 0.1579 0.1081 0.0435 0.0674 0.0827
SUM 1 1 1 1 1 1 1

Table 16. Normalized Matrix with row average for Facility cost (Criterion 4)

Location Addis Ababa Hawassa Bahir Dar Dire Dawa Nekemtie Dessie Averages
Addis Ababa 0.0435 0.0233 0.0233 0.0341 0.0637 0.0545 0.0404
Hawassa 0.1304 0.0698 0.0465 0.0568 0.0764 0.0727 0.0754
Bahir Dar 0.1739 0.1395 0.0930 0.0568 0.0955 0.1091 0.1113
Dire Dawa 0.2174 0.2093 0.2791 0.1705 0.1911 0.1091 0.1961
Nekemtie 0.2609 0.3488 0.3721 0.3409 0.3822 0.4364 0.3569
Dessie 0.1739 0.2093 0.1860 0.3409 0.1911 0.2182 0.2199
SUM 1 1 1 1 1 1 1

5.2.4 Combine the vectors of preferences for each criterion, from above,
into one preference matrix that shows the preference for each
location for each criterion

Table 17. Criteria Preference Matrix

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Criterion
Location Market Potential Level of Transportation cost Facility cost
Competition
Addis Ababa 0.5609 0.4695 0.4757 0.0404
Hawassa 0.1447 0.1901 0.2456 0.0754
Bahir Dar 0.1117 0.1345 0.0432 0.1113
Dire Dawa 0.0816 0.0703 0.0563 0.1961
Nekemtie 0.0242 0.0283 0.0966 0.3569
Dessie 0.0768 0.1072 0.0827 0.2199
SUM 1 1 1 1

The above preference matrix shows the most favored location, best score, against a specific
criterion. Addis Ababa, for instance, is the most preferred location in terms of the three
criteria namely, Market potential, Level of competition and Transportation cost while
Nekemtie is the best preferred in terms of facility cost. The ranks for each criterion is
summarized as follows in the order of most preferred to least preferred.

 Market Potential: Addis Ababa, Hawassa, Bahir Dar, Dire Dawa, Dessie, Nekemtie
 Level of competition: Addis Ababa, Hawassa, Bahir Dar, Dessie, Dire Dawa, Nekemtie
 Transportation cost: Addis Ababa, Hawassa, Nekemtie, Dessie, Dire Dawa, Bahir Dar
 Facility cost: Nekemtie, Dessie, Dire Dawa, Bahir Dar, Hawassa, Addis Ababa

However, the manager should prefer the best location based on the cumulative effect of all
the criteria in contrast to the above results. Therefore, we proceed to the next level of
analysis.

6. Ranking the Criteria

Based on the above preference matrix we were able to identify the best location evaluated
against each criterion. Had the decision been based on single criterion only, we could have
chosen the best location and recommend right away from the above matrix. Nonetheless,
the decision involves multiple criteria and hence we need to weight and rank the criteria
themselves in order to determine their relative importance in the decision-making process.

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Accordingly, the criteria should be ranked using the pairwise comparison and preference
scale the same way we did for the locations. The distribution manger used the preference
scale and did the same scoring for the criteria like he did for the locations which we use for
computing. Below are the developed pairwise matrix for the four criteria, and all other
matrices we applied for the locations above until we get a preference vector from
normalized matrix row averages.

6.1 Develop a pairwise comparison matrix for the criteria

Table 18. Pairwise comparison for the four criteria

Level of Transportation
Criterion Market Potential Competition cost Facility cost
Market Potential 1 3 7 7
Level of Competition 1/3 1 4 3
Transportation cost 1/7 1/4 1 1/2
Facility cost 1/7 1/3 2 1

Table 19. Sum of the column values

Level of Transportation
Criterion Market Potential Competition cost Facility cost
Market Potential 1 3 7 7
Level of Competition 1/3 1 4 3
Transportation cost 1/7 1/4 1 ½
Facility cost 1/7 1/3 2 1
SUM 34/21 55/12 14 23/2

6.2 Compute the normalized matrix by dividing each value in each column
of the matrix by the corresponding column sum

Table 20. Normalized matrix for the criteria

Level of Transportation
Criterion Market Potential Competition cost Facility cost
Market Potential 21/34 36/55 1/2 14/23
Level of Competition 7/34 12/55 2/7 6/23

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Transportation cost 3/34 3/55 1/14 1/23

Facility cost 3/34 4/55 1/7 2/23
SUM 1 1 1 1

6.3 Develop the preference vector by computing the row averages for the
normalized matrix

Table 21. Normalized matrix with row average for the criteria shown in decimal

Level of Transportation
Criterion Market Competition cost Facility cost Row Average
Potential
Market Potential 0.6176 0.6545 0.5000 0.6087 0.5952
Level of Competition 0.2059 0.2182 0.2857 0.2609 0.2427
Transportation cost 0.0882 0.0545 0.0714 0.0435 0.0644
Facility cost 0.0882 0.0727 0.1429 0.0870 0.0977
SUM 1.00 1.00 1.00 1.00 1.00

From the above table we got the below preference vector for the selection criteria.

Criterion
Market Potential 0.5952
Level of Competition 0.2427
Transportation cost 0.0644
Facility cost 0.0977

The preference vector above quantitatively showed that the Market potential is the highest
priority criterion, Level of competition the second highest, Facility cost the third highest
and Transportation is the fourth and least priority criterion for the location decision.
Therefore, market potential is found to be the strongest criterion in terms of making the
location decision.

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6.4 Overall Score

Using the AHP mathematical steps we have so far ranked the selection criteria in order of
priority and also the most preferred locations using each selection criterion. But at this
stage we will combine the two and compute an overall score by multiplying the criteria
preference matrix (table 17) by the preference vector (table 21) and sum up the products.
This step will give us the base to make our best recommendation for the location selection
decision. Below is how we do the computation.

Criterion
Location Market Level of Transportation Facility
Potential Competition cost cost
Addis Ababa 0.5609 0.4695 0.4757 0.0404 0.5952
Hawassa 0.1447 0.1901 0.2456 0.0754 0.2427
Bahirdar 0.1117 0.1345 0.0432 0.1113 0.0644
Diredawa 0.0816 0.0703 0.0563 0.1961 0.0977
Nekemtie 0.0242 0.0283 0.0966 0.3569
Dessie 0.0768 0.1072 0.0827 0.2199

By multiplying the above figures above, we get the below summary which is the overall
score used to rank the locations based on the magnitude of their scores.

Score for Addis Ababa: (0.5609*0.5952) + (0.4695*0.2427) + (0.4757*0.0644) +

(0.0404*0.0977) = 0.4824
Score for Hawassa: (0.1447*0.5952) + (0.1901*0.2427) + (0.2456*0.0644) +
(0.0754*0.0977) = 0.1555
Score for Bahir Dar: (0.1117*0.5952) + (0.1345*0.2427) + (0.0432*0.0644) +
(0.1113*0.0977) = 0.1128
Score for Dire Dawa: (0.0816*0.5952) + (0.0703*0.2427) + (0.0563*0.0644) +
(0.1961*0.0977) =0.0884
Score for Nekemtie: (0.0242*0.5952) + (0.0283*0.2427) + (0.0966*0.0644) +
(0.3569*0.0977) = 0.0624

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Score for Dessie: (0.0768*0.5952) + (0.1072*0.2427) + (0.0827*0.0644) +

(0.2199*0.0977) =0.0986

Putting the above information together and ranking the alternatives, the below table
summarizes.
Table 22. Locations’ Overall Score and Rank

Location Overall Score Rank

Addis Ababa 0.4824 1
Hawassa 0.1555 2
Bahir Dar 0.1128 3
Dire Dawa 0.0884 5
Nekemtie 0.0624 6
Dessie 0.0986 4

The above overall score reveals that Addis Ababa, Hawassa and Bahir Dar are the first three
locations recommended to have the depot while Dessie, Dire Dawa and Nekemtie are at the
bottom three position in their order of preference.

6.5 Checking the Analytical Hierarchy Process Consistency

The whole process we have gone through above based on pairwise comparisons that
involved subjective judgement of the decision maker. As the decision maker makes
preferences, however, there may be a sort of inconsistency among his judgements. This
level of inconsistency is measured by a consistency index. The consistency index (CI) gives
information about logical consistency among pairwise comparison judgments. When CI
is=0, there is no logical inconsistency or the judgment is considered 100% consistent.
However, we don’t expect 100% consistency as judgements involve subjective human
elements. But for the model to be meaningful, the level of inconsistency should not be
greater than 10%. Below we will check the consistency of our analysis above by following
the appropriate steps of computing consistency index.
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6.5.1 Multiply the pairwise comparison for each of the criteria by the
preference vector for the criteria and sum the products

Criterion Market Level of Transportati Facility

Potential Competition on cost cost
Market 1 3 7 7 0.5952
Potential
Level of 1/3 1 4 3 0.2427
Competition
Transportation 1/7 1/4 1 1/2 0.0644
cost
Facility cost 1/7 1/3 2 1 0.0977

Market Potential: (1*0.5952) + (3*0.2427) + (7*0.0644) + (7*0.0977) = 2.4580

Level of Competition: (1/3*0.5952) + (1*0.2427) + (4*0.0644) + (3*0.0977) = 0.9918
Transportation Cost: (1/7*0.5952) + (1/4*0.2427) + (1*0.0644) + (1/2*0.0977) = 0.2590
Facility Cost: (1/7*0.5952) + (1/3*0.2427) + (2*0.0644) + (1*0.0977) = 0.3925

6.5.2 Divide the results above by the corresponding values from the
preference vector and compute the sum and average of the results

Market Potential: 2.4580/0.5952= 4.1296

Level of Competition: 0.9918/0.2427= 4.0873
Transportation Cost: 0.2590/0.0644= 4.0198
Facility Cost: 0.3925/0.0977= 4.0172
SUM: 16.2540
Average: 4.0635

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6.5.3 Compute the consistency index

CI= 4.0635 – n; n is number of items compared, we have 4 criteria, hence n=4

n-1
CI= 4.0635 – 4 ⇒ CI= 0.0635 ⇒ CI= 0.0212
4-1 3
As seen from the above computation the Consistency Index, CI equals 0.0212 and the
consistency index couldn’t have a 0 result. This show us, the distribution manager was not
consistent in his preference. However, this doesn’t mean that the model we applied didn’t
work out. But still we need to check to what extent it is deviated from consistency and this
is checked by the following step.

6.5.4 Check if the level of inconsistency is acceptable

We have said that due to subjective judgments made by decision makers, inconsistency is
experienced and that is normal. However, the level of inconsistency shouldn’t be out of
range as this means the whole analysis and thereby recommendation is meaningless. To
check if the level of inconsistency is acceptable or not we need to compare the consistency
index with the random index (RI), which is the consistency index of a randomly generated
pairwise comparison matrix. This RI is found from a table, below, for the same purpose and
we pick the RI for 4 criteria as we have used 4 criteria.

Table 22. RI values for n items being compared

Number of Items (n) 2 3 4 5 6 7 8 9 10
Random Index (RI) 0 0.58 0.90 1.12 1.24 1.32 1.41 1.45 1.5

The ratio of Consistency Index to Random Index gives

Ratio= CI/RI= 0.0212/0.90 = 0.0235

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Generally, the degree of inconsistency is satisfactory and acceptable if the ratio is less than
0.1. If the ratio exceeds 0.1, the model would be considered to be meaningless. In our case,
the degree of inconsistency is within the range and hence the model results are meaningful.

7. Results and Recommendations

The step by step Analytical Hierarchy Process we applied to support the distribution
manager of Zebidar Brewery Sc in selecting a location for a distribution center (depot)
showed that Addis Ababa is the best preferred location from the rest of the locations
followed by Hawassa and Bahir Dar respectively. Dessie is the fourth preferred location in
the list while Dire Dawa and Nekemtie are the last two preferred locations.

Accordingly, we strongly recommend that Zebidar brewery Sc should have keep the current
distribution center (Depot) in Addis Ababa and considers the other locations according to
the sequence of their overall score-based preferences.

8. Feedback from the company

After we finalized the assignment, we have presented the results of the AHP to the
distribution manager and, in the first place, he was so grateful about our engagement
mentioning that he has learnt a lot from the assignment. He said the recommendation from
the model and some of his initial choices in mind didn’t match but will look into the
recommendation again and will most likely consider it.

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