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Unformatted text preview: 1 The Analytic Hierarchy Process -- A Step-by-Step Tutorial and Example Developed for the SCM 371 Course, Fall 2011, by Dr. Tobias Schoenherr Decision: to select a job from three offers received Relevant decision making criteria (important issues/attributes to consider in the decision): 1. Location 2. Company Culture 3. Advancement Opportunities 4. Salary Three feasible alternatives are available: 1. Midwest Offer 2. West Coast Offer 3. East Coast Offer Step I: Construct the decision hierarchy Job Offer Selection Decision Location Company Culture Advancement Opportunities Salary Midwest Offer West Coast Offer East Coast Offer 2 Step II: Determine the relative importance of attributes [and subattributes]: pairs of attributes are evaluated on a nine-point scale Preference/Importance Value Equally preferred/important 1 Equally to moderately preferred/more important 2 Moderately preferred/more important 3 Moderately to strongly preferred/more important 4 Strongly preferred/more important 5 Strongly to very strongly preferred/more important 6 Very strongly preferred/more important 7 Very strongly to extremely strongly preferred/more important 8 Extremely preferred/more important 9 Note: this is the standard scale in AHP that is usually applied, and I recommend to always use the scale in this fashion, although the statements may sound a bit artificial or awkward. Since we have four attributes, there will be six unique pairs that are to be compared. Specifically: 1. How much more important is location compared to company culture ? 2. How much more important is location compared to advancement opportunities ? 3. How much more important is location compared to salary ? 4. How much more important is company culture compared to advancement opportunities ? 5. How much more important is company culture compared to salary ? 6. How much more important is advancement opportunities compared to salary ? This is a subjective judgment, so values will differ based on your preferences. Let me just continue with the following example evaluation: For the individual making the decision, the following could apply: 1. Location and company culture have equal importance (none is more important than the other), thus this pair receives a value of 1. 2. Location is moderately more important than the advancement opportunities , thus this pair receives a value of 3. 3. Location is very strongly more important than salary , thus this pair receives a value of 7. 4. Company culture is equally to moderately more important than the advancement opportunities , thus this pair receives a value of 2. 5. Company culture is very strongly to extremely strongly more important than salary , thus this pair receives a value of 8....
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This note was uploaded on 12/29/2011 for the course SCM 371 taught by Professor Tobias during the Fall '11 term at Michigan State University.
- Fall '11