W2_Afra_Best Alternative using AHP


1.     Problem Recognition
      Manager or decision maker need to use an appropriate method to make a complex decision. One of those methods is AHP (Analytic Hierarchy Process). Rather than prescribing a "correct" decision, the AHP helps decision makers find one that best suits their goal.
AHP tool will be used on this blog to choose the best and correct Gas turbine depends on
some specifications and criteria.



2.     Feasible alternatives
They are four Gas turbines with different specification has been selected to choose between by using five criteria (most important and common) which are: manufacturer, output, heat rate, price, Efficiency and Shaft speed. The price of each gas turbine shows in the table below: 
(A, B, C, D are dummy names for gas turbine) 

A
332 Million dollars
B
234 Million dollars
C
222 Million dollars
D
123 Million dollars






Table 1: Gas Turbines Price

3.    Development of the outcome of Alternative
Decision hierarchical tree below places all criteria and alternative gas turbines. This decision hierarchical has three levels: the top level shows the overall decision which is to select the best gas turbine for a plant, the second level shows all criteria need to be considered while selecting the best turbine, the third level shows all four alternatives.


Figure 1: Decision hierarchical tree

4.  Selection Criteria
Pair-wise comparison will be used to select the best alternative, this technique the relative
priority for each criterion against each other criterion as well as the priority for each alternative
(gas turbine) against each other alternative. The Pair-wise comparison uses a scale that ranges
from equally preferred to extremely preferred. Here is the scale

Figure 2: Pair-wise comparison scale

5.   Analysis and comparison of the Alternative
The table below develops a weight for every single criterion by developing single Pair-wise comparison matrix for the criteria. all elements on the diagonal assign to 1 since When we compare any alternative against itself the judgment must be that they are equally preferred.


Manufacturer
Output
Heat Rate
Shaft speed
Efficiency
Manufacturer
1
5
2
7
4
Output
1/5
1
2
4
2
Heat Rate
1/2
1/2
1
2
3
Shaft speed
1/7
1/4
1/2
1
3
Efficiency
1/4
1/2
1/3
1/3
1
Total
2.09
7.25
5.83
14.33
13.00
Table 2 Pair-wise comparison matrix


The table below shows the normalized pairwise comparison matrix.  Along with the average for each row.



Manufacturer
Output
Heat Rate
Shaft speed
Efficiency
Total
Average
Manufacturer
0.48
0.69
0.34
0.49
0.31
2.31
0.46
Output
0.10
0.14
0.34
0.28
0.15
1.01
0.20
Heat Rate
0.24
0.07
0.17
0.14
0.23
0.85
0.17
Shaft speed
0.07
0.03
0.09
0.07
0.23
0.49
0.10
Efficiency
0.12
0.07
0.06
0.02
0.08
0.35
0.07
Total
1
1
1
1
1


Table 3 Normalized pairwise comparison matrix

Furthermore, to calculate consistency index, following formula will be used.


                CI = 0.0180. To identify the random index, the table below will be used.
RI value is equal to 1.12

According to above formula, CR is equal to 0.0161. Based on Saaty’s empirical suggestion that if C.R. < 0.10 is acceptable.
Table below is the alternative ranking matrix


Manufacturer
Output
Heat Rate
Shaft speed
Efficiency
A
0.0882
0.2769
0.3728
0.1824
0.2459
B
0.3126
0.2403
0.3728
0.4759
0.2534
C
0.5154
0.1922
0.2052
0.2910
0.2624
D
0.0837
0.2906
0.0491
0.0507
0.2383
Table 4 Alternative ranking matrix

The alternative ranking is the product between the alternative ranking matrix and criteria ranking.



A
0.19
B
0.32
C
0.36
D
0.13
Table 5 Alternative ranking 

The alternative that having highest weights will be selected. Gas Turbine C is the highest ranked Turbine.

6.  Selection of the preferred Alternative
The mentioned criteria above are not enough to judge. After alternative ranking has been defined, we should compare with the price using benefit-cost ratio.


Cost
Normalized Cost
Alternative ranking
Benefit-Cost Ratio
A
332 .000
0.36
0.19
0.53
B
234 .000
0.26
0.32
1.23
C
222 .000
0.24
0.36
1.5
D
123 .000
0.14
0.13
0.93
Total
911.000



Table 6 Benefit-Cost Ratio
Based on benefit-cost analysis, Gas Turbine C has the highest ratio.

6.  Performance Monitoring and the Post Evaluation of result
      To find more accurate result, this tool needs to be done by someone who understands the problem and criteria very well. To make sure about the result I'll do another blog posting in coming weeks with the same problem but by using non-compensatory models.



References: 
1.       Suresh. (2017). Ahp calculations. Slideshare.net. Retrieved 13 November 2017, from https://www.slideshare.net/lakshanasuresh/ahp-calculationshttps://en.wikipedia.org/wiki/Analytic_hierarchy_process_%E2%80%93_car_example
2.       W5_WW_ Analytical Hierarchy Process. (2017). GARUDA AACE 2015. Retrieved 13 November 2017, from https://garudaaace2015.wordpress.com/2015/03/28/w5_ww_-analytical-hierarchy-process-2/
3.       How to make a decisions: The Analytic Hirerrchey Process. (1990) (pp. 15-19). North Holland. Retrieved from https://www.google.com.om/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0ahUKEwiR9PH-
_bvXAhXQIOwKHfveC8YQFgg_MAQ&url=https:%2F%2Fwww.researchgate.net%2Ffile
.PostFileLoader.html%3Fid%3D5879e59e615e27bbf27ef4e3%26assetKey%3DAS%253
A450351808684035%25401484383646513&usg=AOvVaw0VtE6wBMM3Umm_zqlcjAw5
4. Ishizaka, A. (2017). Clusters and pivots for evaluating a large number of alternatives in AHP. Retrieved 13 November 2017, from http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0101-74382012000100006

Comments

  1. WOW!!!! AWESOME posting Afra......

    Impressed to see you start out with such an advanced tool/technique. What you might be interested in reading is this paper by Ms Lita Liana from Shell Indonesia. http://pmworldjournal.net/wp-content/uploads/2014/01/pmwj19-feb2014-liana-analytical-hierarchy-for-roi-oilandgas-projects-indonesia-FeaturedPaper.pdf

    She used AHP to calculate the Minimum Atractive Rate of Return (MARR) on oil and gas projects based on their RISK PROFILE. I have a suspicion that what she did is something that might be of value to OPWP?

    Take a look and see what you think...

    BR,
    Dr. PDG, Jakarta

    ReplyDelete
  2. Thank you Dr. PDG for your impressive comment.
    Honestly I already have experience with AHP, because of that I started with it : )
    Regarding the topic, sure, I will go and read about the it ! I will be happy if I could find out something that might be of value to OPWP.

    Afra.

    ReplyDelete

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