MCDM

Multi-Criteria Decision Making

 PRESENTATION CONTENT:
MCDM definition

Problem solving steps

Criteria specifications

Weighting the criteria

Standardizing the raw scores

Problem solving techniques

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 MCDM definitions

- consists of constructing a global preference

relation for a set of alternatives evaluated
using several criteria

- selection of the best actions from a set of

alternatives, each of which is evaluated
against multiple,and often conflicting criteria.

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 MCDM consists of two related paradigms:
MADM: these problems are assumed to have a
predetermined , limited number of decision alternatives.

MODM: the decision alternatives are not given. instead the

set of decision alternatives is explicitly defined by
constraints using multiple objective programming. the
number of potential decision alternatives may be large.

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 MCDM problem has four elements:

Goal

Objectives

Criteria

Alternatives

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 Examples of Multi-Criteria Problems
 In determining an electric route for power
transmission in a city, several criteria could be
considered:

 Cost
 Health
 Reliability
 Importance of areas

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 Examples of Multi-Criteria Problems
 Locating a nuclear power plant involves criteria such
as:

Safety
Health
Environment
Cost

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 Problem solving steps:

1) Establish the decision context, the decision

objectives (goals), and identify the decision maker(s).

2) Identify the alternatives.

3) Identify the criteria (attributes) that are relevant to the

decision problem.

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 Problem solving steps:
4) For each of the criteria, assign scores to measure the
performance of the alternatives against each of these and
construct an evaluation matrix (often called an options
matrix or a decision table).

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 Problem solving steps:

5) Standardize the raw scores to generate a priority

scores matrix or decision table.

6) Determine a weight for each criterion to reflect how

important it is to the overall decision.

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 Problem solving steps:

7) Use aggregation functions (also called decision rules) to

compute an overall assessment measure for each decision
alternative by combining the weights and priority scores.

8) Perform a sensitivity analysis to assess the robustness of

the preference ranking to changes in the criteria scores
and/or the assigned weights.

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 Criteria characteristics

Completeness: It is important to ensure that all of the

important criteria are included.
 Redundancy: In principle, criteria that have been
judged relatively unimportant or to be duplicates should
be removed at a very early stage.
 Operationality: It is important that each alternative can
be judged against each criterion.

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 Criteria characteristics

Mutual independence of criteria:

Straightforward applications of MCDM require that
preferences associated with the consequences of the
alternatives are independent of each other from one
criterion to the next.
Number of criteria: An excessive number of criteria leads
to extra analytical effort in assessing input data and can
make communication of the results of the analysis more
difficult.

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 Weighting the criteria:
Direct Determination
Rating, Point allocation, Categorization
Ranking
Swing
Trade-off
Ratio (Eigenvector prioritization)
Indirect Determination
Centrality
Regression – Conjoint analysis
Interactive

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 Weighting the criteria:

-The ranking method: In this method, the criteria are simply ranked
in perceived order Of importance by decision- makers: c1 > c2 > c3 >
… > ci . The method assumes that the weights are non-negative and
sum to 1.

- Rating method: The point allocation approach is based on allocating

points ranging from 0 to 100, where 0 indicates that the criterion can
be ignored, and 100 represents the situation where only one criterion
need to be considered. In ratio estimation procedure which is a
modification of the point allocation method. A score of 100 is assigned
to the most important criterion and proportionally smaller weights are
given to criteria lower in the order. The score assigned for the least
important attribute is used to calculate the ratios.

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 Weighting the criteria:

- Pair wise comparison method: involves pair wise

comparisons to create a ratio matrix. It uses scale
table for pair wise comparisons and then computes
the weights.

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 Standardizing the raw scores
Because usually the various criteria are measured in
different units, the scores in the evaluation matrix S
have to be transformed to a normalized scale. some
methods are :

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 Problem solving techniques

Some problem solving techniques are :

• SAW (Simple Additive Weighting)

• TOPSIS (Technique for Order Preference by Similarity to
the Ideal Solution)
• ELECTRE (Elimination et Choice Translating Reality)
• BAYESIAN NETWORK BASED FRAMEWORK
• AHP (The Analytical Hierarchy Process)
• SMART (The Simple Multi Attribute Rating Technique )
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• ANP (Analytic network process)
 The selection of the models are based on the following
evaluation criteria suggested by Dodgson et al. (2001):

• internal consistency and logical soundness;

• transparency;
• ease of use;
• data requirements are consistent with the importance
of the issue being considered;
• realistic time and manpower resource requirements for
the analytical process;
• ability to provide an audit trail; and
• software availability, where needed.
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 SAW (Simple Additive Weighting):

Multiplies the normalized value of the criteria for the

alternatives with the importance of the
criteria .the alternative with the highest score is
selected as the preferred one.

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 SAW (Simple Additive Weighting):

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 A simple example of using SAW method
 Objective
Selecting a car

Criteria
Style, Reliability, Fuel-economy

 Alternatives
Civic Coupe, Saturn Coupe, Ford Escort, Mazda
Miata

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 Weights and Scores

Weight 0.3 0.4 0.3 Si

Style Reliability Fuel Eco.
Civic 7 9 9 8.4
Saturn 8 7 8 7.6
Ford 9 6 8 7.5
Mazda 6 7 8 7.0

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 TOPSIS (Technique for Order Preference by Similarity to the 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.
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 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) mn 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)
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 Steps of TOPSIS
 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

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 Steps of TOPSIS
 Step 2: Construct the weighted normalized decision
matrix.
Assume we have a set of weights for each criteria w
j
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

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 Steps of TOPSIS
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

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 Steps of TOPSIS
 Step 4: Calculate the separation measures for each
alternative.
The separation from the ideal alternative is:
Si * = [  (vj*– vij)2 ] ½ i = 1, …, m
j

Similarly, the separation from the negative ideal

alternative is:
S'i = [  (vj' – vij)2 ] ½ i = 1, …, m
j

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 Steps of TOPSIS
Step 5: Calculate the relative closeness to the ideal
solution Ci*

Ci* = S'i / (Si* +S'i ) , 0  Ci*  1

Select the Alternative with Ci* closest to 1.

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 An example of using TOPSIS method
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

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 Steps of TOPSIS
Step 1: calculate (x2ij )1/2 for each column and

divide each column by that 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

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 Steps of TOPSIS
Step 2 : 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

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 Steps of TOPSIS
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
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 Steps of TOPSIS
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

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 Steps of TOPSIS
Step 4 (a): determine separation from ideal solution A* =
{0.059, 0.244, 0.162, 0.080}
Si* = [  (vj*– vij)2 ] ½ 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
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 Steps of TOPSIS
Step 4 (a): determine separation from ideal solution Si*

(vj*–vij)2 Si* = [  (vj*– vij)2 ] ½

Civic 0.000845 0.029

Saturn 0.003208 0.057

Ford 0.008186 0.090

Mazda 0.003389 0.058

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 Steps of TOPSIS
Step 4: determine separation from negative ideal solution
Si'

(vj'–vij)2 Si' = [  (vj'– vij)2 ] ½

Civic 0.006904 0.083

Saturn 0.001629 0.040

Ford 0.000361 0.019

Mazda 0.002228 0.047

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 Steps of TOPSIS
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

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 AHP (The Analytical Hierarchy Process)

AHP uses a hierarchical structure and pairwise

comparisons.
An AHP hierarchy has at least three levels:
1) the main objective of the problem at the top.
2) multiple criteria that define alternatives in the
middle.(m)
3) competing alternatives at the bottom.(n)

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 An example of hierarchical value tree:

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 Steps of AHP
1) Criteria weighting must be determined using
(m*(m-1))/2 pair wise comparisons.
2) Alternatives scoring using m*((n*(n-1))/2) pair
wise comparisons between alternatives for each
criteria.
3) After completing pair wise comparisons AHP is
just the hierarchical application of SAW.

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 An example of using AHP method
selecting a new hub airport

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 Scale of relative importance table

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 Some AHP method shortcomings
Comparison inconsistencies:
decision-makers using AHP often make
inconsistent pair wise comparisons.
Rank reversals
changing of relative alternative rankings due to
the addition and deletion of alternatives.
Large number of comparisons
where there are either a large number of attributes
and/or alternatives to be evaluated.

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 SMART(The Simple Multi Attribute Rating Technique )

In a general sense, SMART is somewhat like AHP

in that a hierarchical structure is created to assist in
defining a problem and to organize criteria.
However, there are some significant differences
between two techniques:
1) SMART uses a different terminology. For
example, in SMART the lowest level of criteria in
the value tree (or objective hierarchy) are called
attributes rather than sub-criteria and the values of
the standardized scores assigned to the attributes
derived from value functions are called ratings.

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 2) The difference between a value tree in SMART
and a hierarchy in AHP is that the value tree has a
true tree structure, allowing one attribute or sub-
criterion to be connected to only one higher level
criterion.
3) SMART does not use a relative method for
standardizing raw scores to a normalized scale.
Instead, a value function explicitly defines how
each value is transformed to the common model
scale. The value function mathematically
transforms ratings into a consistent internal scale
with lower limit 0, and upper limit 1.
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 References:
 Milan Janic and Aura Reggiani, OTB Research Institute; An
Application of the Multiple Criteria Decision Making
(MCDM) Analysis to the Selection of a New Hub Airport
 Frederick University of Cyprus, Limassol, Cyprus and CEO,
Transmart Consulting, Athens, Greece; Examining the use and
application of Multi-Criteria Decision Making Techniques in
Safety Assessment
 HAROLD VAUGHN JACKSON JR.; A STRUCTURED
APPROACH FOR CLASSIFYING AND PRIORITIZING
PRODUCT REQUIREMENTS

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