Selection of new production facilities with the Group Analytic Hierarchy Process Ordering method

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Abstract

This paper presents the Group Analytic Hierarchy Process Ordering (GAHPO) method: a new multi-criteria decision aid (MCDA) method for ordering alternatives in a group decision. The backbone of the method is the Analytic Hierarchy Process (AHP) which is separated into two hierarchies for a cost and a benefit analysis. From these two analyses, a partial ordinal ranking can be deduced, where three relations between alternatives exist: the preference, indifference, and incomparability. A complete cardinal ranking can also be deduced by dividing the score of the benefit analysis by the score of the cost analysis. Another particularity of GAHPO is the incorporation of ‘fairness’ when assigning weights to the decision makers. GAHPO has been developed to solve a real case: a selection of new production facilities with multiple stakeholders. By applying this method, we found four main advantages: significant reduction of time and effort in the decision process; easiness for the decision makers to arrive at a consensus; enhancement of the decision quality and documentation with justification of the decision made. In using the proposed method both efficiency and equity are achieved in the decision making process.

Research highlights

► The Group Analytic Hierarchy Process Ordering method, a new MCDA method, has been developed. ► It can model three relations between alternatives: preference, indifference, and incomparability. ► It incorporates ‘fairness’ when assigning weights to the decision-makers in group decisions. ► It has been applied in a real case study for selection of new production facilities.

Introduction

Strategic decisions are fundamental to any company. They are usually not determined by a single decision-maker but by a group of decision-makers, who may have different objectives. In this case, two distinct methodologies are commonly used (Srdjevic, 2007): multi-criteria decision-making methods or voting system. The voting system has surely high democratic properties and bypasses the data requirements of multi-criteria approaches (Hurley & Lior, 2002) but moves stakeholder into a polarisation of their opinion and no intensity of their preferences can be measured. It is a head-count of yes or no. Therefore, a minority with strong convictions will unconditionally be beaten from a majority, whatever the strength of their opinion is. Furthermore, a voting system does not necessitate a modelling of the problem and therefore has difficulty to incorporate several criteria in the decision (Craven, 1992). Saaty and Shang (2007) recommend using AHP in order to resolve deficiencies of the conventional voting mechanism. AHP is a multi-criteria method developed by Saaty, 1977, Saaty, 1980 and applied in several area: banks (Seçme, Bayrakdaroglu, & Kahraman, 2009), manufacturing systems (Iç and Yurdakul, 2009, Li and Huang, 2009, Yang et al., 2009), operators evaluation (Şen & ÇInar, 2010), drugs selection (Vidal, Sahin, Martelli, Berhoune, & Bonan, 2010), site selection (Önüt, Efendigil, & Soner Kara, 2010), software evaluation (Cebeci, 2009, Chang et al., 2009), evaluation of website performance (Liu & Chen, 2009), strategy selection (Chen and Wang, 2010, Li and Li, 2009, Limam Mansar et al., 2009, Wu et al., 2009), supplier selection (Chamodrakas et al., 2010, Wang et al., 2010, Wang and Yang, 2009), selection of recycling technology (Hsu, Lee, & Kreng, 2010), firms competence evaluation (Amiri, Zandieh, Soltani, & Vahdani, 2009), weapon selection (Dagdeviren, Yavuz, & KilInç, 2009), underground mining method selection (Naghadehi, Mikaeil, & Ataei, 2009), software design (Hsu, Kao, & Wu, 2009), organisational performance evaluation (Tseng & Lee, 2009), staff recruitment (Celik et al., 2009, Khosla et al., 2009), construction method selection (Pan, 2009), warehouse selection (Ho & Emrouznejad, 2009), technology evaluation (Lai & Tsai, 2009), route planning (Niaraki & Kim, 2009) and many others. This paper presents the Group Analytic Hierarchy Process Ordering (GAHPO), which improves the AHP on several points. We separate the cost and benefit criteria of the AHP, which simplify the appraisal and provide a more accurate result, as will be shown later. Results are then partially aggregated for an ordinal partial ranking or fully aggregated for a cardinal complete ranking. The new GAHPO method is also adapted for group decisions. The task to assign weights (importance) to the different decision-makers of the group is often a difficult one. We propose a new simple and fair method, where the weights of the members are judged by the other members of the group.

The paper starts with a literature review on the Analytic Hierarchy Process, followed by the description of the new proposed method and then finalised by an application of production facilities selection.

Section snippets

Analytic Hierarchy Process

AHP decomposes the problem into small parts in order to facilitate the decision-maker in the appraisal task. First, a hierarchy structuring the problem is constructed (Fig. 1). The top of the hierarchy represents the goal. Below we have the criteria, sub-criteria and alternatives. The appraisal can be constructed top–down or bottom–up (Fig. 2) but always using pairwise comparisons. It allows the user to concentrate only on the question “How much A is better than B?” and to ignore temporary the

Analytic hierarchy process ordering

Later, it was proposed (Azis, 1990, Clayton et al., 2001, Wedley et al., 2001) to decompose the model into further subproblems, in separating criteria with opposite direction in different hierarchies: benefits versus costs. The reason of this additional decomposition is that criteria on the same direction are much easier to compare than two in opposite directions like a criterion to be minimised and another to be maximised. In this paper, we introduce the concepts of partial ordinal ranking

Group decision

As a decision affects often several persons, the standard AHP has been adapted in order to be applied in group decisions. Consulting several experts avoids also bias that may exist when the judgements are considered from a single expert. There are four ways to combine the preferences into a consensus rating (Table 1).

The consensus vote is used, when we have a synergistic group and not a collection of individuals. In this case, the hierarchy of the problem must be the same for all

Weight of stakeholders in GAHPO

If all decision-makers do not have an equal weight, their priority must be determined. The weights reflect the expertise of a decision-maker (Weiss & Rao, 1987) or the importance of the impact of the decision on the decision-maker. The weights can be allocated by a supra decision-maker or by a participatory approach. Finding a supra decision-maker or benevolent dictator, which is accepted by everybody, can be difficult. Cho and Cho (2008) have a surprising way to determine the weights with the

Methodological approach

The case study took place in a world leading packing company, which had no previous experience in multi-criteria methods. Our approach was based on four phases, each one corresponding to a meeting with the decision-makers of the company, where the researchers where facilitating the decision process.

  • (a)

    An awareness session on the GAHPO methodology was given. An understanding of the GAHPO and required inputs is necessary in order to avoid improper use of the method (Cheng, Li, & Ho, 2002). The

A case study: selection of new production facilities

The studied packing company has two plants in England: the ‘Green’ plant producing paper products and the ‘Plasto’ plant producing plastic items. Due to a repatriation of another production plant from Scotland, the Plasto plant has to be redesigned. Three alternatives are possible:

  • (1)

    Redesign of Plasto plant, hereafter referred to as Plant Redesign.

  • (2)

    Automation of Plasto production processes, hereafter referred to as Plant Automation.

  • (3)

    Relocation and consolidation of Green plant with Plasto, hereafter

Results of the implementation

The recommendations of the model have been implemented with the general satisfaction of all stakeholders.

The successful acceptance of the proposed methodology can be attributed to the following reasons. Firstly, it helped to describe the problem and break down decision criteria into manageable components. Secondly, it led the group into making a specific decision for consensus or tradeoff. Thirdly, it provided an opportunity to examine disagreements and stimulate discussion and opinion.

Conclusions

In this paper we have presented the GAHPO a new multi-criteria decision aid method developed to solve a real problem. The backbone of the method is the AHP with several improvements:

  • Cost and benefit criteria are separated in two hierarchies in order to simplify their comparisons.

  • Stakeholders are incorporated in the first level of the hierarchy in order to elicit a group preference.

  • The weight of each stakeholders are determined by others stakeholders. A consistency check is applied in order to

Acknowledgements

We are grateful to Binoy Perumpalath, who helped to collect the data for the case study.

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