The document provides an overview of the Analytic Hierarchy Process (AHP), a decision-making tool developed by Thomas Saaty in the 1970s. It discusses the background, development, methodology, applications, advantages, and disadvantages of AHP. Examples of organizations that use AHP for decision making are also given, along with a case study on how AHP was used to evaluate candidates for an entrepreneur award in Terengganu, Malaysia.

1. Managerial Decision Analysis
Journal Summary
Analytic Hierarchy Process
PREPARED BY :
MOHD FARID AWANG
NORHAIZUM SAHRIL
KARTINI ABD MANAF
NOR SAKINAH ABDUL EANICH

2. OUTLINE
— Background of AHP
— Development of AHP
— What is AHP?
— AHP process
— Application
— Advantages &
Disadvantages
— Case study
— Conclusion

3. AHP
FOUNDER
Name
Thomas
L.
Saaty
Born
Mosul,
Iraq
DOB
July
18,
1926
(86
yr)
Degrees
PhD,
Mathema?cs,
Yale
University,
1953
Post-­‐graduate
study,
University
of
Paris,
1952-­‐53
MA,
Mathema?cs,
Yale
University,
1951
MS,
Physics,
Catholic
University
of
America,
1949
BA
,
Columbia
Union
College,
1948
Hobbies
Collec?ng
jokes
and
maintaining
his
world-­‐wide
joke
list,
caring
for
his
garden
(coffee-­‐grounds
are
his
latest
find
as
the
best
fer?lizer
ever),
and
collec?ng
new
stories
and
ideas
about
the
crea?ve
process.

4. Name
Thomas
L.
Saaty
Latest
publica?on
Principia
Mathema?ca
Decernendi:
Mathema?cal
Principles
of
Decision
Making,
RWS
Publica?ons,
4922
Ellsworth
Avenue,
Pi]sburgh,
PA
15213,
2010.
Academic
Ac?vi?es
His
current
research
is
in
decision-­‐making,
planning,
conflict
resolu?on
and
neural
synthesis.
He
has
published
more
than
300
ar?cles
and
33
books
on
decision-­‐making,
opera?ons
research,
and
mathema?cs.
His
non-­‐technical
book
on
the
AHP,
Decision
Making
for
Leaders,
has
been
translated
to
more
than
10
languages.
His
other
recent
books
are
The
Brain:
Unraveling
the
Mystery
of
How
It
Works,
(generalizing
the
ANP)
and
Crea?ve
Thinking,
Problem
Solving
&
Decision
Making.
At
the
Katz
School
he
teaches
Decision
Making
in
Complex
Environments,
using
both
the
AHP
and
the
ANP
and
Crea?vity
and
Problem
Solving.

5. THE
BIRTH
OF
AHP
Dr. Thomas Saaty developed AHP in the 1970’s, while he
was a professor at the Wharton School of Business of the
University of Pennsylvania, an Ivy League university in
Philadelphia, Pennsylvania.

6. DEVELOPMENT
OF
AHP
A group of professors lead by Prof. Emilio Esposito from University of Naples
“Federico II” have organized a biennial conference called The International
Symposium on the Analytic Hierarchy Process (ISAHP). The first conference
held in 1988 at Tianjin University, China. It brings together researchers, teachers
and users of AHP and ANP to share their research and experiences in decision
making.
The latest ISAHP was in 2011 and held in Sorrento (Naples - ITALY)
from June 15 to June 18, 2011. The next ISAHP will be held in Malaysia in 2013.
(www.ISAHP.org)

7. WHAT
IS
AHP?
Qualita? Quan?ta
Decision
ve
?ve
§ Addi;ve
Normaliza;on
PRIORITIES
§ Eigenvector
§ Geometric
Mean
Factor
Factor
Alterna?ve
Alterna?ve

8. AHP
PROCESS
Step
• Defining
the
decision
problem
1
Step
• Developing
a
conceptual
framework
2
Step
• Semng
up
the
decision
hierarchy
3
Step
• Collec?ng
data
from
experts
4
Step
• Employing
the
pair-­‐wise
comparison
5
Step
• Es?ma?ng
rela?ve
weights
of
elements
6
Step
• Calcula?ng
the
degree
of
consistency
7
Step
• Calcula?ng
the
mean
rela?ve
weights
8

9. AHP
-­‐
EXAMPLE
GOAL
FACTOR
ALTERNATIVE

10. Single
choice
decision
Quality
Mul;-­‐choice
Management
decision
APPLICATION
Ranking
Benchmarking
decision
Resource
Prio;za;on
alloca;on

11. APPLICATION
SINGLE CHOICE MULTI-CHOICE RANKING
DECISION
DECISION
DECISION
• Adopting an AHP • Integrated AHP • A study of bank
to select Internet and entropy to selection decision
advertising develop a durable in Singapore
networks
goods chain store using the AHP
• AHP helps franchisee • Housing
evaluate project selection model
environment
in India oil preferences of
pipelines industry young consumers
in Guangzhou,
China
• The AHP in
project evaluation

12. APPLICATION
(CONT..)
RESOURCE
PRIOTIZATION
ALLOCATION
• Going from six sigma • Using AHP to
to design for six analyze the IT
sigma: an exploratory outsourcing decision
study using AHP
• Information priority-
setting for better
resource allocation
using AHP

13. APPLICATION
(CONT..)
BENCHMARKING
QUALITY MANAGEMENT
• Benchmarking facility • Choosing a quality
management: applying AHP
improvement project using
• Benchmarking project the AHP
management practices of • Evaluating the comparative
Caribbean organizations service quality of
using AHP supermarkets using the AHP
• Marketing mix formulation for • Measuring the operational
higher education performance of ICY using the
AHP approach
• Practical application of an
AHP for the improvement of
the warranty management

14. ADVANTAGES
AND
DISADVANTAGES
ADVANTAGES
DISADVANTAGES
• StraighLorward
and
• Subjec;ve
Evalua;on
convenient
-­‐Conversion
from
verbal
• Simplicity
by
using
pair-­‐ to
numeric
scale
wise
comparisons
-­‐Inconsistencies
• Consistency
in
imposed
by
1
to
9
scale
evalua;on
-­‐Conflict
between
• Versa;lity
decision
maker
-­‐Decision
maker
capacity

15. INTERESTING
CASES
OF
AHP
§ Xerox
Corpora;on
uses
AHP
for
R&D
decisions
on
porqolio
management,
technology
implementa?on,
and
engineering
design
selec?on.
§ Bri;sh
Columbia
Ferries
Corpora;on
in
Canada
uses
AHP
in
the
selec?on
of
products,
suppliers
and
consultants.
§ NASA
used
AHP
to
consider
criteria
for
Safety,
Performance,
Reliability
and
Flexibility
in
recommending
a
power
source
for
the
first
lunar
outpost.
§ General
Motors
use
AHP
to
evaluate
design
alterna?ves,
perform
risk
management,
and
arrive
at
the
best
and
most
cost-­‐effec?ve
automobile
designs.
§ Universi;
Islam
Antarabangsa
(UIA)
used
AHP
in
benchmarking
factors
influencing
interna?onal
students’
choice
towards
universi?es
in
Malaysia.

16. CASE
STUDY
–
ANUGERAH
USAHAWAN
TERENGGANU
2011
• Biennial
event
• Current
prac?ce
=
weighted
average
– Compare
candidates
vs
factor
only
• 3
main
factor
• 3
winners
• Early
assump?on
:
– Co
A
is
rank
no
1
=
organized,
located
in
prime
area,
proper
documenta?on,
well
presented,
good
appearance

17. AHP
Model
for
Anugerah
Usahawan
Terengganu
The
Winner
Financial
Socio-­‐economy
Management
Co
A
Co
B
Co
C

18. Applying
AHP
in
ranking
the
3
winners
AHP
MATRIX
SOCIO-­‐ECONOMY
MANAGEMENT
A
3
B
7
A
9
B
7
A
3
C
7
A
7
C
3
C
3
B
6
C
7
B
7
FINANCIAL
SOCIO-­‐
A
5
B
8
ECONOMY
7
MANAGEMENT
5
SOCIO-­‐
A
3
C
9
ECONOMY
7
FINANCIAL
3
C
9
B
7
MANAGEMENT
5
FINANCIAL
3

19. MGT
A B C
Addi,ve
Normalisa,on
Method
A 1 9/7 7/3
B 7/9 1 7/5
C 3/7 5/7 1
1.000 1.000 1.000
FINANCIAL
A B C
A 1 5/8 3/9
B 8/5 1 7/9
C 9/3 9/7 1
1.000 1.000 1.000
SOCIO-­‐ECONOMY
A B C
A 1 3/7 3/7
B 7/3 1 6/3
C 7/3 3/6 1
1.000 1.000 1.000
CRITERIA
Socio Mgt Finance
Socio 1 7/5 7/3
Mgt 5/7 1 5/3
Fiance 3/7 3/5 1
1.000 1.000 1.000

20. MGT A B C Total Priorities
A 0.453 0.429 0.493 1.375 0.458256
B 0.353 0.333 0.296 0.982 0.327209
C 0.194 0.238 0.211 0.644 0.214536
1.000 1.000 1.000 3.000 1.000 CR
:
0.006
FINANCIAL A B C Total Priorities
A 0.179 0.215 0.158 0.551 0.18373
B 0.286 0.344 0.368 0.998 0.332565
C 0.536 0.442 0.474 1.451 0.483705
1.000 1.000 1.000 3.000 1.000 CR
:
0.013
SOCIO A B C Total Priorities
A 0.176 0.222 0.125 0.524 0.174564
B 0.412 0.519 0.583 1.514 0.504539
C 0.412 0.259 0.292 0.963 0.320897
1.000 1.000 1.000 3.000 1.000 CR
:
0.042
CRITERIA PROFIT SUCCESS COST Total Priorities
PROFIT 0.467 0.467 0.467 1.400
0.46667
SUCCESS 0.333 0.333 0.333 1.000
0.33333
COST 0.200 0.200 0.200 0.600
0.20000
1.000 1.000 1.000 3.000 1.000 CR
:
0.002

21. FINAL
RESULT
84%
76%
74%

22. WHY
?
• Commi]ee
favor
Co
A
because
of
percep?on,
what
they
see
and
the
power
of
persuasion
• Tend
to
forget
the
main
objec?ve
of
the
Award
• Equal
percentage
for
all
the
3
main
factors
• The
marks
given
is
a
one
way
/
direct
from
judge/
panel
to
candidates.
No
comparison
between
candidates
• Totally
depend
on
the
panel
views
and
percep?on
(based
on
experience
and
background)
• CURRENT
APPROACH
IS
NOT
OBJECTIVE
enough
• Recommend
apply
AHP
in
AUT
2013

23. SUMMARY
• AHP
is
a
simple,
prac?cal
and
handy
• The
one-­‐to-­‐one
qualita?ve
and
quan?ta?ve
comparison
is
clear
and
easy
to
digest
by
decision
maker.
• AHP
could
apply
jointly
with
other
decision
making
tools
such
as
SWOT
analysis
which
will
generate
be]er
result.
• AHP
is
being
widely
used
and
accepted
by
various
organiza?on,
enterprises
and
country
all
over
the
world.
• AHP
ac?vely
nurture
intellectual
discussion,
debate
and
research
on
various
field
and
study.