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A Modified Analytic Hierarchy Process for
Automated Manufacturing Decisions
STEPHEN F. WEBER United States Department of Commerce
National Institute of Standards and Technology
Office of Applied Economics
Computing and Applied Mathematics Laboratory
Gaithersburg, Maryland 20899
Contribution of the National Institute of Standards and Technology, DECISION ANALYSIS?MULTIPLE CRITERIA
not subject to copyright in the United States ANALYTIC HIERARCHY PROCESS
0091-2102/93/2304/0075$01.25
This paper was refereed.
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WEBER
manufacturing decisions can no longer rely criteria. For example, lexicographic order
solely on traditional measures of financial ing uses secondary criteria only as tie
worth because so many impacts cannot be breakers; the satisficing method imple
readily denominated in dollars [Berliner ments criteria only as lower or upper
and Brimson 1988; Canada and Sullivan bound hurdles; and dominance requires
1989; Choobineh and Suri 1986, pp. 269 that all criteria support the same ranking.
281; Drucker 1990; Jelinek and Goldhar Methods that allow direct trade-offs
1986; Owen 1990; Padmanabhan 1989; among all the criteria are preferable be
Sullivan 1986]. They must consider all the cause they integrate all criteria into a single
significant effects of their decisions. overall score for ranking alternatives. The
The impacts often ignored can be classi analytic hierarchy process (AHP) devel
fied as quantitative or qualitative. Nonfi oped by Saaty [1980] is one such scoring
nancial quantitative impacts can be mea method. It has recently gained popularity
sured in physical terms but cannot easily and been applied to a wide variety of deci
be converted to dollars. Such nonmonetary sion problems.
measures of performance include through The basic structure of the AHP is well
put, cycle time, and scrap. In contrast, suited to economic decisions regarding au
nonfinancial qualitative impacts cannot
even be measured in physical terms. They Multi-attribute decision
typically involve issues that affect the
methods account for both
long-term strategic position of the firm,
such as product quality, manufacturing
financial and nonfinancial
flexibility, and technology advancement. impacts.
Ignoring these often beneficial, yet intangi
ble, effects of automation may bias deci toma ted manufacturing investments. It can
sions against new manufacturing technolo incorporate into a unified analytic frame
gies. To evaluate automation technologies, work a wide variety of normally incom
managers need a method that includes all mensurable impact criteria, some of which
relevant impacts. may be financial, some nonfinancial yet
A Multi-Criteria Approach quantitative, and some purely qualitative.
Approaches that include more than one The AHP appeals to decision makers be
measure of performance in the evaluation cause they participate directly in the pro
process are called multi-attribute or multi cess and can generally understand how re
criteria decision methods [Canada and sults are derived.
Sullivan 1989; Gass 1985; Goicoechea, Researchers are beginning to apply the
Hansen, and Duckstein 1982; Sullivan AHP to automated manufacturing invest
and Liggett 1988; Zeleny 1982]. The ad ment decisions. Arbel and Seidmann
vantage of these methods is that they can [1984], Canada and Sullivan [1989], and
account for both financial and nonfinancial Varney, Sullivan, and Cochran [1985] di
impacts. Some multi-criteria methods do rectly applied the AHP to sample manu
not permit trade-offs among all decision facturing investment decisions. They all
INTERFACES 23:4 76
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MODIFIED AHP
used benefit-to-cost ratios (BCR) and the applications is the failure to preserve valid
nine-point integer scale (1 to 9) of relative quantitative performance data. Many of
importance for evaluating pairwise com the criteria important to automation deci
parisons, both originally suggested by sions are quantified, though not always in
Saaty [1980, pp. 54 and 115-118]. Frazelle dollar terms. These data must be preserved
[1985] used the same integer scale to de and their informing power brought to bear
cide among material handling technolo on the decision. Most of these recent AHP
gies. Wabalickis [1988] applied the AHP to applications force decision makers to aban
evaluate a flexible manufacturing system don such crucial data. A better approach
(FMS). Troxler and Blank [1989] borrowed would be to combine and integrate reliable
the hierarchy concept from the AHP to il quantitative data with the informed quali
lustrate one decision model for manufac tative judgments of the decision maker.
turing investments, although they fail to Thus, the decision would use actual data
describe how to implement the AHP with directly without resorting to the pairwise
real data. comparison judgment method when rating
Applying the AHP to Manufacturing alternatives with respect to quantitative
Three problems arose in these recent criteria. Judgments would be used only
AHP applications to manufacturing auto when reliable data reflecting the perfor
mation decisions. First, the integer scale mance of the alternative were not available
originally proposed by Saaty [1980, p. 54] for a particular criterion. Wabalickis [1988]
is easily misused. For example, the scale does suggest using data on inventory costs,
calls for the value 3 to indicate "weak im although he offers no clear rationale for his
portance" and "slight" preference of A method of integrating the cost data with
over B. The eigenvalue method Saaty rec the judgment scores.
ommends computes this comparison into The third problem concerns the use of
weights of 0.75 for A and 0.25 for B, in the BCR approach for deciding among mu
strict proportion to the integer value en tually exclusive alternatives. Saaty [1980,
tered. Thus, the weakly more important A pp. 115-118] illustrates this approach for a
gets a score three times as large as that of
B. The verbal definitions and explanations
of the integer scale lead decision makers to
The integer scale proposed by
violate the critical principle of proportion Saaty is easily misused.
ality in pairwise judgments. Pairwise com
parison values expressing a slight prefer decision among alternative transportation
ence should more properly be less than systems for crossing a river. All the studies
1.5, a ratio resulting in weights of 0.6 for cited earlier except Frazelle [1985] and
A and 0.4 for B. Indeed, most comparison Wabalickis [1988] use this BCR approach,
values in manufacturing decisions will which has separate hierarchies for benefit
likely be expressed as nonintegers in the elements and for cost elements. The deci
1.0 to 3.0 range. sion maker evaluates each hierarchy to de
The second problem that arose in these rive benefit scores and cost scores and then
July-August 1993 77
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WEBER
forms BCRs for each alternative. The alter?Buy a new computer numerical control
native with the highest BCR is best. This (CNC) mill with an interactive graphic
BCR approach is unsuitable for the most controller and computer-aided design
common type of automation decision?se(CAD); and
?Replace the mill with a machining center
lecting the best alternative among mutually
exclusive options. The option with the and programmable tool changer.
highest BCR may have only a moderate The general approach of the AHP is to
benefit with a very low cost. Since decisionstructure such a complex decision into a
makers may select only one option, they hierarchy of its elements (criteria and alter
might easily forego a preferable option natives). The particular AHP hierarchy I
with greater net benefits. The proper ap used to evaluate the machine shop alterna
proach is to construct a single consolidated tives has three levels (Figure 1). Three cat
hierarchy including both advantageous egories seem sufficient for this decision:
(benefit) and disadvantageous (cost) ele monetary (financial) criteria, engineering
ments, instead of using the two separate performance measures, and strategic con
hierarchies to form a ratio. siderations. Monetary criteria include ini
A Machine Shop Decision tial cost, operation and maintenance costs,
I modified the AHP to address and solve and training costs. Engineering perfor
these problems using four basic steps. mance criteria are production rate, cycle
First, specify the evaluation criteria and thetime, setup time, and scrap. Strategic con
investment alternatives to be evaluated. siderations are manufacturing flexibility,
Second, make pairwise comparisons be product quality, business growth, and im
tween criteria to establish their weights. plementation risk. Table 1 shows the data
Third, rate the investment alternatives used in rating the alternatives.
with respect to the criteria, using the pair At each level in the hierarchy, the deci
wise comparison process to rate the quali sion maker establishes scores among ele
tative criteria. For quantitative criteria, ments by constructing a matrix of pairwise
however, use measured performance data,
such as cost, setup time, or throughput.
The AHP allows for and deals
Fourth, combine the ratings with criteria
weights into an overall rating for each in explicitly with inconsistencies
vestment alternative and then rank the al among pairwise comparison
ternatives accordingly. judgments.
I have applied the modified AHP to a
typical machine shop decision. A shop comparison judgments about relative dif
manager considering alternatives to an exferences between any two elements. The a?j
isting conventional milling machine faces value of the matrix represents the relative
several options: importance or preference of the fth ele
?Retrofit with a power feed, digital readment over the ;th element. Both reflexivity
out of positions, and numerical control (a? = 1 along the diagonal) and reciprocity
(NC) features; (Uij = 1/ttji) are assumed. Thus, only values
INTERFACES 23:4 78
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MODIFIED AHP
O&M Cost
Training
Production Rate
Cycle Time
Setup Time
Scrap
Flexibility
Quality
Growth
Risk
Figure 1: The analytic hierarchy process hierarchy for the machine shop decision shows cate
gories of criteria on the left (Level 1), criteria themselves in the middle (Level 2), and alterna
tives on the right (Level 3).
above the diagonal must be entered, so sistencies among the pairwise comparison
that for n elements, one needs n(n?1)/2 judgments. For example, A need not be
distinct comparison judgments. four times as important as C just because
I used the pairwise comparison method A is twice as important as B and B is twice
to establish weights for the criteria given in as important as C. In technical terms, this
the top two levels of the machine shop hi means that the user is not forced to pre
erarchy. First I compared the categories serve cardinal transitivity among compari
(Level 1) with each other, then the criteria sons. The AHP even provides an explicit
(Level 2) within each category. Because measure of inconsistency that indicates
there are three categories, I needed only how far the pairwise judgments deviate
three [ = 3(3?1)/2] comparison judgments from perfect cardinal transitivity. The mea
on Level 1 (Table 2). sure can suggest whether to revisit pair
A major strength of the AHP is that it wise comparisons.
allows for and deals explicitly with incon In the modified AHP discussed here, the
July-August 1993 79
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WEBER
Monetary Criteria
Initial Cost 12,000 25,000 120,000
O & M Cost 2,000 4,000 15,000
Training 3,000 8,000 20,000
Performance Measures
Production Rate units/day 14 40
Cycle Time days 10 6 2
Setup Time minutes 30 20 3
Scrap kilograms/day 200 75 20
Strategic Considerations
Flexibility [Not quantified]
Quality [Not quantified]
Growth [Not quantified]
Risk [Not quantified]
Table 1: For the three monetary criteria and the four performance measures, data are available
to rate the three alternatives of the machine shop decision. The four strategic criteria require
the pairwise comparison method, since they are not quantified.
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MODIFIED AHP
ments. Thus, the numerator of the incon comparison method is similar to the
sistency index measures how far from per weighting procedure except the query
fect consistency the matrix is. This index is posed for positive criteria becomes: "With
then divided by a similar index based on respect to this criterion, the row alternative
randomly selected pairwise comparisons to is how many times as desirable as the col
form the inconsistency ratio. Saaty sug umn alternative?" When rating alternatives
gests that acceptable levels of consistency with respect to negative criteria (such as
are assured as long as this ratio does not costs), the query becomes: "A is how
exceed 0.10. Table 2 shows the weights many times as desirable (in terms of being
and inconsistency ratio computed for the more available or easier to obtain) as B?"
categories (Level 1). Thus if A costs twice as much as B, A
To compare criteria within the perfor should be rated as one half as desirable as
mance category (Level 2), which in this B. The eigenvector of the largest eigen
case has four elements, I had to make six value then represents the ratings of each
comparisons (Table 3). The procedure is alternative for the criterion in question.
similar to that illustrated in Table 2. I re One must use this pairwise comparison
peated the process for the other two cate method to rate alternatives whenever data
gories. Then I multiplied the criterion that are directly or inversely proportional
weight within each category by the cate to the desirability of alternatives are un
gory weight to get a combined or global available.
weight for each criterion. If proportional data (or other data, such
After I established all the weights, I as exponential or logarithmic, that can eas
needed to rate the alternatives (Level 3) ily be transformed into proportional scales)
with respect to each criterion using either are available, they may be used directly.
the pairwise comparison method or the For example, production rate data are di
proportional data method. The pairwise rectly proportional if 200 units per day are
Table 3: Within performance criteria, pairwise comparison judgments, such as "The produc
tion rate is half (0.5) as important as cycle time," establish the criteria weights. Inconsistency
among comparisons less than 0.10 is not significant.
July-August 1993 81
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WEBER
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MODIFIED AHP
decision into a hierarchy of its elements Christoph Witzgall, and two anonymous
and establish priorities among the ele reviewers.
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Navy Manufacturing Technology Program.
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July-August 1993 83
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WEBER
INTERFACES 23:4 84
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