ANALYTIC HIERARCHY

PROCESS(AHP)
AN OVERVIEW
WHAT IS AHP?
 The Analytic Hierarchy Process (AHP) is a structured
technique for dealing with complex decisions
 AHP helps the decision makers find the one that best
suits their needs and their understanding of the problem
 It can assist with identifying and weighting selection
criteria, analyzing the data collected for the criteria and
expediting the decision-making process
HISTORY
 AHP was developed by Thomas L. Saaty, an American
mathematician working at the University of Pittsburgh in
the 1970s
 developed based on mathematics and psychology

 has been extensively studied and refined since then

WHY IS IT IMPORTANT?
 AHP helps capture both subjective and objective
evaluation measures, providing a useful mechanism for
checking the consistency of the evaluation measures and
alternatives suggested by the team thus reducing bias in
decision making.
USES
 Choice:- The selection of one alternative from a given
set of alternatives, usually where there are multiple
decision criteria involved
 Ranking:- Putting a set of alternatives in order from
most to least desirable
 Benchmarking:- Comparing the processes in one's own
organization with those of other good organizations
 Quality management:- Dealing with the
multidimensional aspects of quality and quality
improvement
APPLICATION IN CURRENT WORLD
 AHP is used around the world in a wide variety of
decision situations, in fields such as government,
business, industry, healthcare, and education
 In deciding how best to reduce the impact of global
climate change
 Quantifying the overall quality of software systems

 Selecting university faculty

BASIC ELEMENTS IN USING AHP
 There are three basic elements in using AHP:

1. Information is decomposed into a hierarchy of

alternatives and criteria

2. Information is then synthesized to determine relative

ranking of alternatives

3. Both qualitative and quantitative information can be

compared using informed judgements to derive weights
and priorities
ADVANTAGES
o Decision hierarchy and pair wise comparisons make
the AHP process easy to comprehend
o The use of a subjective scale, such as “strongly
preferred”, rather than a quantitative scale is
particularly useful when it is difficult to formalize
some criteria (attributes) quantitatively
o It is usually much easier to compare two items at a
time than to compare many items all at once
DISADVANTAGES

o The decision hierarchy in AHP assumes independence

among criteria, which is not always appropriate
o The subjective scale is subject to human errors and
biases
o The number of pair wise comparisons becomes quite
extensive when the number of attributes and
alternatives is large
EDUCATION & SCHOLARLY RESEARCH
 AHP is considered an important subject in many
institutions of higher learning, including schools of
engineering and graduate schools of business
 The International Symposium on the Analytic Hierarchy
Process (ISAHP) holds meetings of academics and
practitioners interested in the field in every two years
 At its 2007 meeting in Chile, over 90 papers were
presented from 19 countries
EXAMPLE OF AHP
 Rishad, instead of attending class, is considering 4 job
offers.
 His offers came from Alpha Manufacturing (A), Bankers
Bank (B), Creative Consulting (C), and Dynamic
Decision Making (D).
 He knew that factors such as location, salary, job
content, and long-term prospects are important to him,
but he wants some way to formalize the relative
importance and some way to evaluate each job offer.
EXAMPLE(CONT.)

 Now, comes the question that how does he determine the

relative importance of the criteria? This is where one’s
own personal judgment comes.
 he determines the ranking of the criteria using following
judgments –
1. Salary is 5 times as important as location
2. Job content is 3 times as important as location
3. Long term prospect is 2 times as important as location
4. Salary is 4 times as important as location
EXAMPLE(CONT.)
Location Salary Content Long
Location 1 1/5 1/3 1/2

Salary 5 1 2 4
Content 3 1/2 1 3

Long 2 1/4 1/3 1

Now we have to calculate overall weight Rishad is assigning to each
objective. This weight will be between 0 and 1, and the total weights
will add up to 1. We do that by taking each entry and dividing by the
sum of the column it appears in. For instance the (Location, Location)
entry would end up as
1/(1+5+3+2) = .091
EXAMPLE(CONT.)
The other entries become:-
Location Salary Content Long Avg.
Location .091 .102 .091 .059 .086

Salary .455 .513 .545 .471 .496

Content .273 .256 .273 .353 .289

Long .182 .128 .091 .118 .130

∑=1
This
 suggests that about half of the objective weight is on salary,
30% on amount of job content, 13% on long term prospects, and
9% on location.
EXAMPLE(CONT.)
 Our next step is to evaluate all the jobs on each
objective. For instance, if we take Location and prefer to
be in Dhaka, Chittagong respectively, then we might get
the following matrix:

Alpha Bankers Creative Dynamic

Alpha 1 1/2 1/3 5

Bankers 2 1 1/2 7

Creative 3 2 1 9

Dynamic 1/5 1/7 1/9 1

EXAMPLE(CONT.)
 Again we can normalize (divide by the sums of the columns, and
average across rows to get the relative weights of each job with
regards to location.) In this case, we get the following:

Alpha Bankers Creative Dynamic Avg.

Alpha .161 .137 .171 .227 .174

Bankers .322 .275 .257 .312 .293

Creative .484 .549 .514 .409 .489

Dynamic .032 .040 .057 .045 .044

∑=1
EXAMPLE(CONT.)

 “Location Value” is about 49% for C, 29% for B, 17%

for A and D has about 4%. We can go through a similar
process with Salary, Content, and Long-term prospects.
Suppose the relative values for the objectives can be
given as follows:
 Recalling our overall weights, we can now get a value
for each job. The value for Alpha Manufacturing is:

(0.174)(0.086) + (0.050)(0.496) + (0.210)(0.289) + (0.510)(0.130) = 0.164

EXAMPLE(CONT.)

Alpha Bankers Creative Dynamic

Location .174 .293 .489 .044

Salary .050 .444 .312 .194

Content .210 .038 .354 .398

Long .510 .012 .290 .188

Similarly, the value Bankers Bank is

(0.293)(0.086) + (0.444)(0.496) + (0.038)(0.289) + (0.012)(0.130) = 0.256

The value for Creative Consultants is 0.335, and that for Dynamic
Decision is 0.238. Creative Consultants it is! Rishad immediately
makes his decision.