April 20, 2012

RDM: ANALYTICAL HIERARCHY PROCESS

ANALYTICAL HIERARCHY PROCESS

Thomas L. Saaty has developed the Analytical Hierarchy Process (AHP). It is a mathematical decision making technique which was developed almost 40 years ago. It is considered to be a further development of the traditional benefit analysis. When a problem arises and there are multiple alternatives to achieve a goal and it becomes difficult to choose the most important one. AHP provides a rational multiple- criteria decision analysis technique for such complex problems. The goal, possible decision alternatives and prioritisation criteria should be known in order to apply the AHP. To come up with a final ranking of the decision alternatives, this process ranks both, the criteria and decision alternatives mathematically. Therefore, AHP considers both qualitative and quantitative aspects of decision. Due to the complex mathematical procedures, there are various software products supporting AHP, including Decisions Lens, TESS (Windows) and Expert Choice (Original).

This technique has experienced high circulation rates in all disciplines, business sectors and regions with the increasing use of IT in the past years. The first step is to develop a hierarchal representation of a problem. At the top of the hierarchy is the overall objective and the decision alternatives are at the bottom. The number of levels in the hierarchy depends on the complexity of the problem and the decision maker’s model of the problem hierarchy. There are eight stages of AHP, namely

1) drawing the problem hierarchy

2) deciding on relative importance of the objectives/ criteria using the Likert scale

3) normalising the objectives/ criteria

4) evaluating decision alternatives

5) calculating the relative score for each decision alternative

6) calculating the total score for each objective

7) calculating the total relative score for each objective and

8) final analysis


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