Vous êtes sur la page 1sur 107

8 Multiple Criteria Decision

Making (MCDM)

ZHAN, Wenjie (Professor)


School of Management, Huazhong
University of Science & Technology
Tel: 027-87556472
Email: wjzhan@mail.hust.edu.cn
8 Multiple Criteria Decision
Making (MCDM)
Objectives:
To know the Structure of Multiple objectives
To deal with Incommensurable units
To deal with Conflict among criteria
Sensitive analysis to weight
To elicit weight with Analytic Hierarchy
Process (AHP)
TOPSIS method
8 Multiple Criteria Decision
Making (MCDM)
8.1 Introduction to MCDM
8.2 Process of MCDM
8.3 Structure of Objectives
8.4 How to deal with Incommensurable units
8.5 How to deal with Conflict among criteria
8.6 Weighted Sum Model vs. Weighted
Product Model
8.7 How to elicit weight: AHP
8.8 TOPSIS method
8.1 Introduction to MCDM
Multiple-criteria decision-making (MCDM) or
multiple-criteria decision analysis (MCDA) is a sub-
discipline of operations research that explicitly
evaluates multiple conflicting criteria in
decision making (both in daily life and in settings
such as business, government and medicine).
MCDM encompasses both MADM (multi-attribute
decision making) and MODM (multi-objective
decision making).
MCDA relates to a number of discrete alternatives.
MODM relates to an infinite or uncountable number of
alternatives.
8.1 Introduction to MCDM
Conflicting criteria are typical in evaluating options:
cost or price is usually one of the main criteria, and
some measure of quality is typically another criterion,
easily in conflict with the cost.
Example 1: In purchasing a car, cost, comfort, safety,
and fuel economy may be some of the main criteria we
consider it is unusual that the cheapest car is the most
comfortable and the safest one.
Example 2: In portfolio management, we are interested
in getting high returns but at the same time reducing our
risks, but the stocks that have the potential of bringing
high returns typically also carry high risks of losing money.
8.1 Introduction to MCDM
The core MCDA is useful for:
Dividing the decision into smaller, more understandable
parts;
Analyzing each part;
Integrating the parts to produce a meaningful solution.

MCDA problems are comprised of five components:


1. Goal
2. Decision maker with opinions (preferences)
3. Decision alternatives
4. Evaluation criteria (interests)
5. Outcomes or consequences associated with
alternative/interest combination
8.1 Introduction to MCDM:
Example 3
Car Price (000s) Fuel Eff. (mpg) Comfort Index
Mercedes (M) 400 25 10
Chevrolet (C) 150 28 3
Toyota (T) 250 35 6
Volvo (V) 350 30 8
It is easy to make decision with single objective, such as
price, fuel efficiency, comfort Index.
But in the real world, people always make their decision with
multiple objectives, which means that they take into account
the price, fuel efficiency, comfort Index at the same time.
8.1 Introduction to MCDM:
Example 3
Two things make multiple objectives decision making
difficult:
(1) Conflict among criteria.
(2) Incommensurable units: Each objective/attribute has a
different unit of measurement.

Car Price (000s) Fuel Eff. (mpg) Comfort Index


Mercedes (M) 400 25 10
Chevrolet (C) 150 28 3
Toyota (T) 250 35 6
Volvo (V) 350 30 8
8.2 Process of MCDM:
an Example (1/8)
MCDM process: Car buying example
Identifying
a Problem
I need to buy
a new car.

Identifying Price
Decision Criteria Interior Comfort
Durability
Repair Record
Performance
Allocating Weights Price 10
to Criteria Interior Comfort 8
Durability 6
Repair Record 4
Performance 2
Decision-making process: Car buying example (2/8)
Developing
Alternatives Dodge Audi Isuzu Chevy

Toyota Ford Jeep Mazda

Analyzing Toyota Price Dodge


Alternatives Comfort
Ford Audi
Durability
Jeep Repair Record Isuzu
Mazda Performance Chevy

Selecting
an Alternative
The Toyota
is the best.

Implementing
the Choice Appraising
Decision Results
Decision-making process: Some comments (3/8)

1) Problem Identification
Solving the wrong problem perfectly is no better than
do nothing for the right problem
Problem is identified by comparing the current state
with some standards that represent a desired state of
affaires:
Past performance, previously set goals, performance of other
units/organizations

Problem identification is subjective in nature


Decision-making process: Some comments (4/8)

2) Decision Criteria
They reflect the factors that decision
makers think important in making the
choice
They are not equally important
A simple approach to deal with different
criteria is to assign them different weights
Judgments are involved in selecting
criteria and assigning weighs
Decision-making process: Some comments (5/8)
3) Developing and Analyzing
Alternatives
INITIAL INTERIOR DURA- REPAIR PERFOR- HAND-
PRICE COMFORT BILITY RECORD MANCE LING TOTAL
ALTERNATIVES (10) (8) (5) (5) (3) (1)

Jeep Cherokee 2 20 10 80 8 40 7 35 5 15 5 5 195


Ford Taurus 9 90 6 48 5 25 6 30 8 24 6 6 223
Mercedes C230 8 80 5 40 6 30 6 30 4 12 6 6 198
Saab 900 9 90 5 40 6 30 7 35 6 18 5 5 218
Mazda 626 5 50 6 48 9 45 10 50 7 21 7 7 221
Dodge Intrepid 10 100 5 40 6 30 4 20 3 9 3 3 202
Ford Explorer 4 40 8 64 7 35 6 30 8 24 9 9 202
Isuzu Rodeo 7 70 6 48 8 40 6 30 5 15 6 6 209
Volvo 850` 9 90 7 56 4 20 4 20 4 12 5 5 203
Audi 90 5 50 8 64 5 25 4 20 10 30 10 10 199
Toyota Camry 6 60 5 40 10 50 10 50 6 18 6 6 224
Volkswagen Passat 8 80 6 48 6 30 5 25 7 21 8 8 212
Decision-making process: Some comments (6/8)
4) Quantitative Tools to
Decision Analysis
Operations research models
Linear programming
Queuing theory
Economic order quantity (EOQ)
Financial techniques
Ratio analysis
Break-even analysis
Decision analysis tools
Decision tree
Payoff matrix
Decision-making process: Some comments (7/8)

5) Implementation and Evaluation


Selecting the best choice based on the analysis
Putting into the decision into action includes
Communicating with those to be affected and
Gaining their commitment of support
Participation of decision making brings enthusiasms
Evaluation of the decision result is an important phase
of decision making process and part of the controlling
function
Decision-making process: Summary (8/8)
Identification of
a problem

Identification of
Decision criteria
Evaluation of decision
Allocation of effectiveness
Weights to criteria

Development of
alternatives

Analysis of
alternatives

The Decision- Selection of an


Making Process alternative

Implementation of
The alternative
8.3 Structure of Objectives
Overall Objective

Objective 1 Objective 2 Objective n

Sub-objective 1 Sub-objective 1 Sub-objective 1 Sub-objective 1

Attribute for Sub- Attribute for Sub- Attribute for Sub- Attribute for Sub-
objective 1 objective 1 objective n objective 1
1) Model for MCDM

Figure 1: A Typical Decision Matrix


2) Basic terms: Objectives
Objectives :
An objective has been defined by Keeney
and Raiffa as an indication of the preferred
direction of movement.
Thus, when stating objectives, we use
terms like minimize or maximize.
Typical objectives might be to minimize
costs or maximize market share.
2) Basic terms: Attributes
Attributes
An attribute is used to measure performance in relation
to an objective.
For example, if we have the objective maximize the
exposure of a television advertisement we may use the
attribute number of people surveyed who recall seeing
the advertisement in order to measure the degree to
which the objective was achieved.
Sometimes we may have to use an attribute which is
not directly related to the objective. Such an attribute
is referred to as a proxy attribute. For example, a
company may use the proxy attribute staff turnover to
measure how well they are achieving their objective of
maximizing job satisfaction for their staff.
3) Typical hierarchical
structure of objectives
Overall Objective

Objective 1 Objective 2 Objective n

Sub-objective 1 Sub-objective 1 Sub-objective 1 Sub-objective 1

Attribute for Sub- Attribute for Sub- Attribute for Sub- Attribute for Sub-
objective 1 objective 1 objective n objective 1
3) First level objective
The highest level of this structure
generally represents the broad overall
objectives that are instrumental in
initiating the multiple objective decision
problem in the first place.
These objectives are, however, often
vaguely stated and, hence, unoperational.
3) Second level objectives
As we go down the hierarchical level,
objectives at the lower level are more specific
and more operational than those in the
higher level.
They are perceived as means to achieving
higher ends represented by objectives in the
higher level.
Thus objectives at the lowest level of the
hierarchy are most specific and most
operational.
4) Attributes for objectives
An objective is operational is there is a
practical way to assess the level of achieving
such an objective.
To facilitate this practical method, a set of
attributes is assigned to each objective in the
lowest level.
An attribute is a measurable quantity whose
value reflects the degree of achievement for a
particular objective.
4) Hierarchical structure of
objectives for the choosing a Car
Maximum satisfaction car to buy

Minimum price Maximum fuel eff. Maximum comfort

400, 150, 250, 350 25, 28, 35, 30 10, 3, 6, 8

Car Price (000s) Fuel Eff. (mpg) Comfort Index


Mercedes (M) 400 25 10

Chevrolet (C) 150 28 3


Toyota (T) 250 35 6
Volvo (V) 350 30 8
5) Example: Choosing a Location
for a Municipal Aquatics Facility (1/7)
Goal: Choose a site for a 40,000 sq. ft. municipal
aquatics facility in a city of 120,000 people.
Decision Makers: 10-member Parks and Recreation
Advisory Board.
Decision Alternatives: Decide among four alternative
sites:
Hawes Tract a vacant site on the rapidly growing outskirts
of town
Chatham Street an infill site near the center of town
Bartley Park a new park on an old agricultural site in the
south
North Cary Park a site adjacent to a community park and a
well-traveled riparian greenway
5) Example: Choosing a Location
for a Municipal Aquatics Facility (2/7)
Identify Stakeholder Interests
Board member interests serve as the criteria by which to evaluate
each site. Interests are identified through a facilitated discussion
of the board members.
The Parks and Recreation Advisory Board members identified 10
key interests, many of which were further broken down
into sub-interests.
Interests and Sub-Interests
Identified by Board Members (3/7)
1Proximity to other facilities
a. Maintain distance from year-round aquatics
b. Maintain distance from seasonal aquatic centers
c. Maintain distance from community centers
d. Be accessible to public parks
e. Be accessible to high schools
2Proximity to users
a. Be easily accessible to existing neighborhoods
b. Be easily accessible to planned neighborhoods to be built in the
near-term
3Ease of access
a. From surrounding neighborhoods
b. By greenway
d. By roadway
Interests and Sub-Interests
Identified by Board Members (4/7)
4Environmental impact
a. Minimize disruption to mature trees and vegetation
b. Avoid topographic challenges
c. Minimize impact to watershed
5Traffic Impact
a. New traffic can be accommodated by existing street network
6Compatibility with Surrounding Area
a. Facility footprint and use must be compatible with surrounding
neighborhood
7Visibility and Profile of Facility
a. Facility footprint must be compatible with, and not detract from
surrounding neighborhood
Interests and Sub-Interests
Identified by Board Members (5/7)
8Ability to Meet Future Demand
a. Tract must be able to accommodate expansion of
facility and uses
9Parking
a. Tract must be of an appropriate dimension to
accommodate parking
10Cost
a. Reduce on-site development costs
b. Reduce off-site development costs
5) Example: Structure of
objectives (6/7)
5) Example: Decision Matrix
(7/7)
1Proximity to other 2Proximity . 10Cost
facilities to users

a. b. c. d. e. a. b. . a. b.
Hawes
Tract
1Proximity to other . 10Cost
facilities
a.
Chath a. Maintain distance from
am year-round aquatics . Reduc
e on-
Street b. Maintain distance from
site
Bartle seasonal aquatic centers
y Park c. Maintain distance from . devel
opme
community centers
North nt
Cary
d. Be accessible to public . costs
parks
Park b.
e. Be accessible to high
Reduc
schools
8.4 How to deal with
Incommensurable units
To solve the problem of incommensurable
units , we need to attribute scales for each
objective.
There are many ways to attribute scales for
each objective.
Nominal Scales
Ordinal Scales
Interval Scales
Ratio Scales
Proportional Scoring
Proportional Scoring is the most application
method to attribute scales for each objective.
Called proportional because scales linearly.

Ui (x) x Worst
Best Worst
Proportional Scoring for price
Car Price After
(000s) Prop Price: Best = 150, Worst =400
Mercedes 400 0
UP(C) = 1;
(M)
UP(M) = 0;
Chevrolet 150 1 UP(T) = 0.6;
(C) UP(V) = 0.2;
Toyota (T) 250 0.6
Toyota is 0.4 away from best to worst.
Volvo is 0.8 away from best to worst.
Volvo (V) 350 0.2
Proportional Scoring for fuel
efficiency
Car Fuel Eff. After
(mpg) Prop Price: Best = 35, Worst =25
Mercedes 25 0
Uf(T) = 1;
(M)
Uf(M) = 0;
Chevrolet 28 0.3 Uf(C) = 0.3;
(C) Uf(V) = 0.5;
Toyota (T) 35 1
Chevrolet is 0.3 away from best to worst.
Volvo is halfway between best/worst.
Volvo (V) 30 0.5
Proportional Scoring for
comfort Index
Car Comfort After
Index Prop Price: Best = 10, Worst =3
Mercedes 10 1
Uc(M) = 1;
(M)
Uc(C) = 0;
Chevrolet 3 0 Uc(T) = 3/7;
(C) Uc(V) = 6/7;
Toyota (T) 6 3/7
Toyota is 4/7 away from best to worst.
Volvo is 1/7 away from best to worst
Volvo (V) 8 6/7
After the Proportional Scoring

Car Price Fuel Eff. Comfort Index

Mercedes (M) 0 0 1

Chevrolet (C) 1 0.3 0

Toyota (T) 0.6 1 3/7

Volvo (V) 0.2 0.5 6/7


8.4 How to deal with
Incommensurable units
Questions:
Q1:What is assumption of risk attitude to
Proportional Scoring?
Q2: Is there any relationship between the
method to deal with incommensurable
units and the risk attitude?
8.5 How to deal with Conflict
among criteria
Most decisions require tradeoffs among
objectives because they are conflicting.
To solve the conflict among criteria, we
use weight for each objective.
Weights may reflect how important the
attribute/objective is to the decision
maker.
1) Example: Weights for
choosing a car
Suppose:
Weight for price =0.4
Weight for fuel efficiency =0.4
Weight for comfort index =0.2
Our weights should respect the Range of the
attribute scales.
It means that the buyer thinks that the price
and the fuel efficiency are equal important,
and both of them are more important that
the comfort.
aggregating values for
choosing a car
Car Price Fuel Eff. Comfort Index aggregating
(0.4) (0.4) (0.2) value
Mercedes (M) 0 0 1 0.2

Chevrolet (C) 1 0.3 0 0.52

Toyota (T) 0.6 1 3/7 0.686


(0.43)
Volvo (V) 0.2 0.5 6/7 0.309
(0.86)
Weights for choosing a car
Suppose:
Weight for price =0.8
Weight for fuel efficiency =0.1
Weight for comfort index =0.1
It means that the buyer thinks that the
price is the most important thing to buy
a car, and the fuel efficiency and the
comfort are equal and less important.
aggregating values for
choosing a car
Car Price Fuel Eff. Comfort Index aggregating
(0.2) (0.2) (0.6) value
Mercedes (M) 0 0 1 0.6

Chevrolet (C) 1 0.3 0 0.26

Toyota (T) 0.6 1 3/7 0.58


(0.43)
Volvo (V) 0.2 0.5 6/7 0.66
(0.86)
8.5 How to deal with Conflict
among criteria
Questions:
Q1: Does the weight for each objective
affect the result of decision?
Q2:The weight for each objective is
whether the subjective or objective
parameter?
2) Sensitive analysis to weight
At which range the weight of comfort can
change the result?
Suppose: the price and the fuel efficiency
are equal important.
We have:
wp+wf+wc=1, then wp+wf=1-wc
wp=wf , then wp=wf=(1-wc )/2
aggregating values for
choosing a car
Car Price Fuel Eff. Comfort aggregating value
(1-wc )/2 (1-wc )/2 Index
wc
Mercedes (M) 0 0 1 wc

Chevrolet (C) 1 0.3 0 0.65-0.65*wc

Toyota (T) 0.6 1 3/7 0.8-0.37*wc


(0.43)
Volvo (V) 0.2 0.5 6/7 0.35+0.51*wc
(0.86)
Sensitive analysis to weight of
comfort

U(T)

U(C)

U(V)

U(M)
8.6 Weighted Sum Model vs.
Weighted Product Model
8.6.1 Weighted Sum Model (WSM)
8.6.2 Weighted Product Model (WPM)
8.6.1 Weighted Sum Model
(WSM)
The weighted sum model (or WSM) is probably
the most commonly used approach, especially in
single dimensional problems.
If there are M alternatives and N criteria then,
the best alternative is the one that satisfies (in
the maximization case) the following expression:
WSM: an Example
Weighted score/sum method
Let Sij score of option i using criterion j
wj weight for criterion j
Si score of option i is given as:

Sij = wj Sij

The option with the best score is selected.


Weighted score/sum method
The method can be modified by using
U(Sij) and then calculating the weighted
utility score.
To use utility the condition of
separability must hold.
Explain the meaning of separability:
U(Si) = wj U(Sij)
U(Si) U( wj Sij)
The main stages in Weighted
score/sum method
Stage 1: Identify the decision maker (or decision
makers). In our problem we will assume that this is just
the buyer of the car, not the seller of the car.
Stage 2: Identify the alternative courses of action. In
our problem these are, represented by the different
brands of cars.
Stage 3: Identify the objectives which are relevant to
the decision problem. In our problem these are the price,
the fuel efficiency, and the comfort index.
Stage 4: For each objective, assign values to measure
the performance of the alternatives on that attribute.
Then, deal with Incommensurable units.
The main stages in Weighted
score/sum method
Stage 5: Determine a weight for each objective.
This may reflect how important the
objective/attribute is to the decision maker
Stage 6: For each alternative, take a weighted
average of the values assigned to that
alternative.
Stage 7: Make a provisional decision.
Stage 8: Perform sensitivity analysis to see how
robust the decision is to changes in the figures
supplied by the decision maker.
8.6.2 Weighted Product Model
(WPM)
The weighted product model (or WPM) is very similar to
the WSM. The main difference is that instead of addition in
the model there is multiplication. Each alternative is
compared with the others by multiplying a number of
ratios, one for each criterion. Each ratio is raised to the
power equivalent to the relative weight of the
corresponding criterion.
In general, in order to compare the alternatives AK and AL,
the following product has to be calculated:
WPM: an Example
WPM: An alternative approach
An alternative approach is one to use only
products without ratios. That is, to use the
following variants of formula
N wj
P( AK ) (a Kj )
j 1
N
P( AK ) w j (a Kj )
j 1
8.7 How to elicit weight
The analytic hierarchy process (AHP) offers a method to
elicit weight when a decision maker is faced with a
problem involving multiple objectives.
The method, which was developed by Thomas Saaty
when he was acting as an adviser to the US government,
has been very widely applied to decision problems in
areas such as economics and planning, energy policy,
material handling and purchasing, project selection,
microcomputer selection, budget allocations and
forecasting.
AHP involves a relatively complex mathematical
procedure.
An overview of the AHP
Stage 1: Make pairwise comparisons of
objectives.
Stage 2: Transform the comparisons
into weights by mathematical procedure.
Stage 3: Check the consistency of the
decision makers comparisons.
What is pair-wise comparison?
Suppose we have two fruits Apple and Banana. I
would like to ask you, which fruit you like better than
the other and how much you like it in comparison
with the other.
Let us make a relative scale to measure how much
you like the fruit on the left (Apple) compared to the
fruit on the right (Banana).
What is pair-wise comparison?
Now suppose you have three choices of fruits. Then
the pair wise comparison goes as the following
What is pair-wise comparison?
Since we have 3 objects (Apple, Banana and
Cheery), we have 3 comparisons. Table below
shows the number of comparisons.
Table 7: Number of comparisons
The Analytic Hierarchy Process
(AHP)
Given values (1-9) Explanation
1 Equal Both objectives have equal importance.

3 Moderate One of the objectives is slightly more


important than the other.

5 Strong One of the objectives is judged as


strongly more important than the other
by experts.
7 Very Strong One of the objectives is judged as very
strongly important compared to the other.

9 Extreme Importance One alternative is strictly superior to the


other one.
2, 4, 6, 8 Intermediate values Used for compromised judgments when
necessary.

The scaling is not necessary 1 to 9 but for qualitative data such as preference,
ranking and subjective opinions, it is suggested to use scale 1 to 9.
Example 1: Choosing a car
(1/7)

Eliciting the weight in choosing a car.

Three objectives:
Price
Fuel efficiency
Comfort
Stage 1: Make pairwise
comparisons of objectives. (2/7)

Price Fuel Comfort

Price 1 2 9

Fuel 1/2 1 7

Comfort 1/9 1/7 1


Stage 2: Transform the comparisons into
weights by mathematical procedure (3/7)
(1) All the quantities in each row are continued
multiplied n times first. Then w* is equal to
the nth power of sum.

wi * n ai1 ai 2 ... ain


(2) Then w* is normalized.

wi *
wi
w1 * w2 * ... wn *
Stage 2: (4/7)

Price Fuel Comf


ort

Price 1 2 9 w1* 3 1 2 9 2.62


1
Fuel 1/2 1 7 w2 * 3 1 7 1.52
2
Comf 1/9 1/7 1 1 1
ort w3* 3 1 0.25
9 7
Stage 2: (5/7)

Sum of w*=4.39
Then:
w1=w1* /4.39=2.62/4.39=0.6
w2=w2* /4.39=1.52/4.39=0.35
w3=w3* /4.39=0.25/4.39=0.05
Stage 3: Check the consistency of
the decision makers comparisons (6/7)
(1) To get the sum of all the quantities in each column.

S j a1 j a1 j ... anj
(2) To get check parameter max.

max w1 S1 w2 S 2 ... wn S n
(3) Compare max with numbers in the table. If max is less than the
corresponding number in the table, it passes the check of consistency.
Stage 3: (7/7)

Price Fuel Comfort

Price 1 2 9 W1=0.6

Fuel 1/2 1 7 W2=0.35

Comfort 1/9 1/7 1 W3=0.05

S1=1+1/2+1/9 S2=2+1+1/7 S3=9+7+1


=1.61 =3.14 =17

max =0.61.61+0.35 3.14+0.05 17= 2.9150 < 3.116


Example 2: School Selection
(1/4)
Pairwise Comparisons among
Objectives (2/4)
Pairwise Comparison of Schools
with each Objective (3/4)
Composition and Synthesis (4/4)
8.8 TOPSIS METHOD
Technique of Order Preference by Similarity to
Ideal Solution
In this method two artificial alternatives are
hypothesized:
Ideal alternative: the one which has the best level
for all attributes considered.
Negative ideal alternative: the one which has the
worst attribute values.

TOPSIS selects the alternative that is the


closest to the ideal solution and farthest
from negative ideal alternative.
Example: ideal solution and
negative ideal alternative
f2 x4 x*

x5
x1
x3
x6

x2
x0

f1
9.5
Input to TOPSIS
TOPSIS assumes that we have m alternatives
(options) and n attributes/criteria and we have the
score of each option with respect to each criterion.

Let xij score of option i with respect to criterion j


We have a matrix X = (xij) mn matrix.
Let J be the set of benefit attributes or criteria
(more is better)
Let J' be the set of negative attributes or criteria
(less is better)
Example 1: TOPSIS - Car
buying (1/17)
Weight 0.1 0.4 0.3 0.2

Style Reliability Fuel Eco. Cost

Civic 7 9 9 8

Saturn 8 7 8 7

Ford 9 6 8 9

Mazda 6 7 8 6
Applying TOPSIS to
Example (2/17)
m = 4 alternatives (car models)
n = 4 attributes/criteria

xij = score of option i with respect to criterion


j
X = {xij} 44 score matrix.
J = set of benefit attributes: style, reliability,
fuel economy (more is better)
J' = set of negative attributes: cost (less is
better)
Step 1 of TOPSIS (3/17)
Step 1(a): calculate (x2ij )1/2 for each
column
Style Rel. Fuel Cost
Civic 49 81 81 64

Saturn 64 49 64 49

Ford 81 36 64 81

Mazda 36 49 64 36
xij2 230 215 273 230
i
(x2)1/2 15.17 14.66 16.52 15.17
Step 1 of TOPSIS (4/17)
Step 1 (b): divide each column by
(x2ij )1/2 to get rij
Style Rel. Fuel Cost
Civic 0.46 0.61 0.54 0.53

Saturn 0.53 0.48 0.48 0.46

Ford 0.59 0.41 0.48 0.59

Mazda 0.40 0.48 0.48 0.40


Step 2 of TOPSIS (5/17)
Step 2 (b): multiply each column by wj
to get vij.
Style Rel. Fuel Cost
Civic 0.046 0.244 0.162 0.106

Saturn 0.053 0.192 0.144 0.092

Ford 0.059 0.164 0.144 0.118

Mazda 0.040 0.192 0.144 0.080


Step3 of TOPSIS (6/17)
Step 3 (a): determine ideal solution A*.
A* = {0.059, 0.244, 0.162, 0.080}
Style Rel. Fuel Cost
Civic 0.046 0.244 0.162 0.106

Saturn 0.053 0.192 0.144 0.092

Ford 0.059 0.164 0.144 0.118

Mazda 0.040 0.192 0.144 0.080


Step 3 of TOPSIS (7/17)

Step 3 (b): find negative ideal solution


A'.
A' = {0.040, 0.164, 0.144, 0.118}
Style Rel. Fuel Cost
Civic 0.046 0.244 0.162 0.106

Saturn 0.053 0.192 0.144 0.092

Ford 0.059 0.164 0.144 0.118

Mazda 0.040 0.192 0.144 0.080


Step 4 of TOPSIS (8/17)

Step 4 (a): determine separation from


ideal solution A* = {0.059, 0.244, 0.162,
0.080} Si* = [ (vj* vij)2 ] for
each row j
Style Rel. Fuel Cost
Civic (.046-.059)2 (.244-.244)2 (0)2 (.026)2

Saturn (.053-.059)2 (.192-.244)2 (-.018)2 (.012)2

Ford (.053-.059)2 (.164-.244)2 (-.018)2 (.038)2


Mazda (.053-.059)2 (.192-.244)2 (-.018)2 (.0)2
Step 4 of TOPSIS (9/17)
Step 4 (a): determine separation from
ideal solution Si*

(vj*vij)2 Si* = [ (vj* vij)2 ]

Civic 0.000845 0.029

Saturn 0.003208 0.057

Ford 0.008186 0.090

Mazda 0.003389 0.058


Step 4 of TOPSIS (10/17)
Step 4 (b): find separation from negative
ideal solution A' = {0.040, 0.164, 0.144,
0.118}
Si' = [ (vj' vij)2 ] for each row
j
Style Rel. Fuel Cost
Civic (.046-.040)2 (.244-.164)2 (.018)2 (-.012)2

Saturn (.053-.040)2 (.192-.164)2 (0)2 (-.026)2

Ford (.053-.040)2 (.164-.164)2 (0)2 (0)2


Mazda (.053-.040)2 (.192-.164)2 (0)2 (-.038)2
Step 4 of TOPSIS (11/17)

Step 4 (b): determine separation from


negative ideal solution Si'

(vj'vij)2 Si' = [ (vj' vij)2 ]

Civic 0.006904 0.083

Saturn 0.001629 0.040

Ford 0.000361 0.019

Mazda 0.002228 0.047


Step 5 of TOPSIS (12/17)

Step 5: Calculate the relative closeness


to the ideal solution Ci* = S'i / (Si* +S'i )

S'i /(Si*+S'i) Ci*

Civic 0.083/0.112 0.74 BEST

Saturn 0.040/0.097 0.41

Ford 0.019/0.109 0.17

Mazda 0.047/0.105 0.45


Summary: Steps of TOPSIS
(13/17)

Step 1: Construct normalized decision matrix.

This step transforms various attribute


dimensions into non-dimensional attributes,
which allows comparisons across criteria.

Normalize scores or data as follows:

rij = xij/ (x2ij) for i = 1, , m; j = 1, , n


i
Summary: Steps of TOPSIS
(14/17)
Step 2: Construct the weighted normalized
decision matrix.

Assume we have a set of weights for each


criteria wj for j = 1,n.
Multiply each column of the normalized
decision matrix by its associated weight.
An element of the new matrix is:
vij = wj rij
Summary: Steps of TOPSIS
(15/17)
Step 3: Determine the ideal and negative ideal
solutions.
Ideal solution.
A* = { v1* , , vn*}, where
vj* ={ max (vij) if j J ; min (vij) if j J' }
i i

Negative ideal solution.


A' = { v1' , , vn' }, where
v' = { min (vij) if j J ; max (vij) if j J' }
i i
Summary: Steps of TOPSIS
(16/17)
Step 4: Calculate the separation measures
for each alternative.
The separation from the ideal alternative is:
Si * = [ (vj* vij)2 ] i = 1, , m
j

Similarly, the separation from the negative


ideal alternative is:
S'i = [ (vj' vij)2 ] i = 1, , m
j
Summary: Steps of TOPSIS
(17/17)

Step 5: Calculate the relative closeness to the


ideal solution Ci*

Ci* = S'i / (Si* +S'i ) , 0 Ci* 1

Select the option with Ci* closest to 1.

WHY ?
In-class Example: recruiting
an assistant (1/7)
A company wants to recruit a new principal assistant for its
international market. Four candidates have been shortlisted:
Anna, Tom, Jack and Emma.
Four criteria have been selected to make the decision. As
the post requires intensive contact with various customers, it
is necessary for the principal assistant to have strong
interpersonal skills, with the ability to interact effectively with
diverse client styles within different working environments.
The role involves dealing with the international market, and
as a result, extensive experience of living abroad would be
advantageous. Similar work experience would be beneficial.
Each candidate is required to sit a written exam to assess
their knowledge of international culture.
The performances of each candidate against the four criteria
are shown in Table 8.1.
In-class Example: recruiting
an assistant (2/7)
Table 8.1 Weights of the criteria and performances of the alternatives.

Interpersonal skills Living abroad Written test Work experience


(score out of 10) (years) (score out of 10) (years)
Weight 0.1 0.4 0.3 0.2
Anna 7 9 9 8
Tom 8 7 8 7
Jack 9 6 7 12
Emma 6 11 8 6
Step 1: Construct normalized
decision matrix (3/7)
Table 1: Normalized decision matrix
Interpersonal skills Living abroad Written test Work experience
(score out of 10) (years) (score out of 10) (years)
Anna 0.46 0.53 0.56 0.47
Tom 0.53 0.41 0.50 0.41
Jack 0.59 0.35 0.44 0.70
Emma 0.40 0.65 0.50 0.35
Step 2: Construct the weighted
normalized decision matrix (4/7)
Table 2: Weighted normalized decision matrix
Interpersonal skills Living abroad Written test Work experience
(score out of 10) (years) (score out of 10) (years)
Weight 0.1 0.4 0.3 0.2
Anna 0.046 0.213 0.168 0.093
Tom 0.053 0.165 0.149 0.082
Jack 0.059 0.142 0.131 0.140
Emma 0.040 0.260 0.149 0.070
Step 3: Determine the ideal and
negative ideal solutions (5/7)
Table 3: Ideal and negative ideal solutions
Interpersonal skills Living abroad Written test Work experience
(score out of 10) (years) (score out of 10) (years)
Anna 0.046 0.213 0.168 0.093
Tom 0.053 0.165 0.149 0.082
Jack 0.059 0.142 0.131 0.140
Emma 0.040 0.260 0.149 0.070
A* 0.059 0.260 0.168 0.140
A 0.040 0.142 0.131 0.070
Step 4: Calculate the separation
measures for each alternative (6/7)
Table 4: Distance calculation
d* d

Anna 0.068 0.084


Tom 0.113 0.035
Jack 0.124 0.073
Emma 0.075 0.120
Step 5: Calculate the relative
closeness to the ideal solution Ci*
(7/7)
Table 5: Table of scores
d* d C*

Anna 0.068 0.084 0.550


Tom 0.113 0.035 0.240
Jack 0.124 0.073 0.370
Emma 0.075 0.120 0.610
Homework 7-1:
The organizers of an international conference
have to choose a hotel that will be the
conference venue. The organizers has five
choices: the Alton, the Buttermere, the Castle,
the Dorset and the Elm.
A value tree was used to identify the
attributes relating to the decision. These are
(i) the cost of using the hotel
(ii) ease of transport to the hotel
(iii) quality of the conference facilities
Homework 7-1 (cont.):
The costs of using the hotels for the conference are given
below. The lower the cost, the better the performance.
Together with scores that the organizers assigned to them for
the non-monetary attributes , such as transport, facilities. (0 =
worst performance on the attribute, 100 = the best).
Homework 7-1 (cont.):
Q1: If the organizers assigned the weights to cost,
transport, facility as 0.2,0.4,0.4. What is the target
hotel?
Q2: If the organizers compare the importance of cost,
transport, facility as follows. What is the target hotel?

cost transport facility

cost 1 2 9
transport 1/2 1 7
facility 1/9 1/7 1
Homework 7-2:
A company is going to choose one of the supplier
among the three according to three criteria: service,
quality, and price. The weights for each of them are
0.2 for service, 0.4 for quality, 0.4 for price. The
normalized decision table is given as follows. Help the
company to choose the supplier according to TOPSIS.
Service Quality Price
(the more, the (the more, the (the less, the better)
better) better)

S1 0.1577 0.7661 0.7840


S2 0.3109 0.6131 0.3666
S3 0.9373 0.1926 0.5009
The end