MCDM

TOPSIS
Amit Prakash Jha
MCDM
MCDM stand for Multi-Criteria Decision-Making

MCDM is all about making decisions when

multiple criteria (or objectives) need to be
considered together, in order to rank or choose
between the alternatives being evaluated.
MCDM
You want to buy a car...

Your decision depends upon multiple criteria ...

• Price
• Mileage (Fuel Consumption)
• Colour
• Resale Value
• After Sales Services
• Technical Specification 1 (Engine Displacement)
• Technical Specification 2 (Power)
• ...
MCDM

Why this is a difficult task?

• There are many objectives to be considered.

• Objectives are, in general, conflicting.
MCDM

MCDM techniques help you to make decisions

in such situations...

• There are many MCDM techniques.

• We will see - TOPSIS.
TOPSIS

TOPSIS : Technique for Order of Preference

by Similarity to Ideal Solution

We will learn TOPSIS through an example...

TOPSIS
The Problem
You are in ministry of defence and you have to
select a fighter aircraft from among a few
possible suppliers...

Sukhoi, Lockheed, Dassault, ....

TOPSIS
Of course there are multiple criteria...
1. Maximum Speed
2. Ferry Range
3. Maximum Payload
4. Acquisition Cost
5. Reliability
6. Maneuverability
TOPSIS

1. X1, Maximum Speed (Mach Number)

2. X2, Ferry Range (Nautical Miles)
3. X3, Maximum Payload (Pounds)
4. X4, Acquisition Cost (Million Dollars)
5. X5, Reliability (High – Low)
6. X6, Maneuverability (High – Low)
TOPSIS
Assume there are four suppliers
1. A1
2. A2
3. A3
4. A4
TOPSIS
Let us tabulate the available information
Decision Matrix

  X1 X2 X3 X4 X5 X6

A1 2 1500 20000 5.5 Average Very High

A2 2.5 2700 18000 6.5 Low Average

A3 1.8 2000 21000 4.5 High High

A4 2.2 1800 20000 5 Average Average

Note: X4 is a cost criteria and others are benefit criteria
TOPSIS
You may notice that Reliability and Maneuverability are intangible criteria and
we should change them to something more tangible – in form of numbers

Decision Matrix

  X1 X2 X3 X4 X5 X6

A1 2 1500 20000 5.5 Average Very High

A2 2.5 2700 18000 6.5 Low Average

A3 1.8 2000 21000 4.5 High High

A4 2.2 1800 20000 5 Average Average

Note: X4 is a cost criteria and others are benefit criteria
TOPSIS
You may notice that Reliability and Maneuverability are intangible criteria and
we should change them to something more tangible – in form of numbers

Decision Matrix

  X1 X2 X3 X4 X5 X6

A1 2 1500 20000 5.5 5 9

A2 2.5 2700 18000 6.5 3 5

A3 1.8 2000 21000 4.5 7 7

A4 2.2 1800 20000 5 5 5

Note: X4 is a cost criteria and others are benefit criteria
TOPSIS
Setting tangible numbers for Reliability and Maneuverability are
based on certain scheme
Cost Attributes Benefit Attributes
Very High 1 Very Low 1
High 3 Low 3
Average 5 Average 5
Low 7 High 7
Very Low 9 Very High 9
TOPSIS
Setting tangible numbers for Reliability and Maneuverability are
based on certain scheme
Cost Attributes Benefit Attributes
Very High 1 Very Low 1
High 3 Low 3
Average 5 Average 5
Low 7 High 7
Very Low 9 Very High 9
TOPSIS ... Step 1
Form decision matrix

Decision Matrix

  X1 X2 X3 X4 X5 X6

A1 2 1500 20000 5.5 5 9

A2 2.5 2700 18000 6.5 3 5

A3 1.8 2000 21000 4.5 7 7

A4 2.2 1800 20000 5 5 5

Note: X4 is a cost criteria and others are benefit criteria
TOPSIS ... Step 2
Form normalized decision matrix

  X1 X2 X3 X4 X5 X6
A1 0.4671 0.3662 0.5056 0.5069 0.4811 0.6708
A2 0.5839 0.6591 0.455 0.599 0.2887 0.3727
A3 0.4204 0.4882 0.5308 0.4147 0.6736 0.5217
A4 0.5139 0.4394 0.5056 0.4608 0.4811 0.3727
TOPSIS ... Step 3a
Set criteria weights

0.2 0.1 0.1 0.1 0.2 0.3

  X1 X2 X3 X4 X5 X6
A1 0.4671 0.3662 0.5056 0.5069 0.4811 0.6708
A2 0.5839 0.6591 0.455 0.599 0.2887 0.3727
A3 0.4204 0.4882 0.5308 0.4147 0.6736 0.5217
A4 0.5139 0.4394 0.5056 0.4608 0.4811 0.3727
TOPSIS ... Step 3b
Multiply each column by the weight and you will get

0.2 0.1 0.1 0.1 0.2 0.3

  X1 X2 X3 X4 X5 X6
A1 0.0934 0.0366 0.0506 0.0507 0.0962 0.2012
A2 0.1168 0.0659 0.0455 0.0599 0.0577 0.1118
A3 0.0841 0.0488 0.0531 0.0415 0.1347 0.1565
A4 0.1028 0.0439 0.0506 0.0461 0.0962 0.1118
TOPSIS ... Step 3c
For each column decide the best and the worst

0.2 0.1 0.1 0.1 0.2 0.3

  X1 X2 X3 X4 X5 X6
A1 0.0934 0.0366 0.0506 0.0507 0.0962 0.2012
A2 0.1168 0.0659 0.0455 0.0599 0.0577 0.1118
A3 0.0841 0.0488 0.0531 0.0415 0.1347 0.1565
A4 0.1028 0.0439 0.0506 0.0461 0.0962 0.1118
TOPSIS ... Step 4
This identifies an ideal and a negative ideal scenario

IDEAL (A*) 0.1168 0.0659 0.0531 0.0415 0.1347 0.2012

NEGATIVE IDEAL (A-) 0.0841 0.0366 0.0455 0.0599 0.0577 0.1118

0.2 0.1 0.1 0.1 0.2 0.3

  X1 X2 X3 X4 X5 X6
A1 0.0934 0.0366 0.0506 0.0507 0.0962 0.2012
A2 0.1168 0.0659 0.0455 0.0599 0.0577 0.1118
A3 0.0841 0.0488 0.0531 0.0415 0.1347 0.1565
A4 0.1028 0.0439 0.0506 0.0461 0.0962 0.1118
TOPSIS ... Step 5
Compute Separation Measures from Ideal and Negative
Ideal Solution for each alternative

Separation Measures
  S* S-
A1 0.0546 0.0983
A2 0.1197 0.0439
A3 0.0580 0.0920
A4 0.1009 0.0458
TOPSIS ... Step 5
Compute Separation Measures from Ideal and Negative
Ideal Solution for each alternative

Separation Measures
  S* S-
A1 0.0546 0.0983
A2 0.1197 0.0439
A3 0.0580 0.0920
A4 0.1009 0.0458
TOPSIS ... Step 6
Compute Relative Closeness to Ideal Solution for each
alternative

Separation Measures    
  S* S- Closeness to Ideal, C
A1 0.0546 0.0983 0.6429
A2 0.1197 0.0439 0.2683
A3 0.0580 0.0920 0.6133
A4 0.1009 0.0458 0.3122
TOPSIS ... Step 7
RANK on the basis of closeness to ideal and you are done

Separation Measures    
  S* S- Closeness to Ideal RANK
A1 0.0546 0.0983 0.6429 1
A2 0.1197 0.0439 0.2683 4
A3 0.0580 0.0920 0.6133 2
A4 0.1009 0.0458 0.3122 3
TOPSIS
And that was TOPSIS

THANK YOU