supporting business decisions a case study: multi-criteria decision modelling
Post on 21-Dec-2015
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SUPPORTING BUSINESS DECISIONS A
Case Study:
Multi-Criteria Decision Modelling
CASE: The Macrosoft Conference
• Cathy Smith, Promotions Manager of Macrosoft Software, must find a venue for this year’s Macrosoft User Group conference
• Already agreed:
It must take place
in mid-December
in or around Leeds
Problem Definition• Scope:
– Choose a conference venue in the Leeds area
• Options:– All centres within 10 miles of City Square
capable of accommodating 100 delegates
• Criteria:– Location
– Facilities
– Cost
A pedantic aside
• The singular is “criterion”
• The plural is “criteria”
• Hence we have one criterion, two or more criteria
• Please don’t write “criterions”!
A Hierarchy of Criteria
• Level 1– LOCATION
– FACILITIES
– COST
• Level 2
– Environment– Access
– Staff experience– Conference rooms– Social meeting places– Accommodation– Catering
The Options
• A ‘quick and dirty’ application of the criteria has resulted in the following shortlist:
A: The Metropole Hotel
B: The Chevin Lodge
C: Leeds Met’s Headingley Campus
D: Cookridge Hall Leisure Centre
A B
C D
Importance Weights• …indicate the relative importance of the criteria• Several sets of weights are needed: one for the Level 1 criteria one for the set of Level 2 criteria associated
with each Level 1 criterion • Weights are based on ‘best judgement’
– Judgement always(?) needed in decision-making– Ideally Cathy will consult others in arriving at the
judgements• Each set must be normalised, i.e. add up to 1 This ensures that the criteria contribute appropriately to
the assessment of the options
Achievement Scores
• …indicate how well each option (ie venue) ‘performs’
relative to the others
against each Level 2 criterion• Scores are based on ‘best available opinion’
– Judgement comes in again therefore
• Against a given criterion:
the best option scores 100(there could be more than one with a score of 100)
the worst option scores 0
other scores fall between 0 and 100
Evaluating the Options
• Level 2 importance weights and achievement scores are now used to compute:
a Level 1 criterion score for each option• These, together with Level 1 importance
weights, are then used to compute: an overall score for each option• The highest aggregate score indicates the
preferred option– Note that it has taken account of all the criteria
A Simple DSS
• …helps to solve Cathy’s problem• It provides:
a clear display of criteria, options, weights and scores
the computations needed for Level 1 scores and overall scores
graphical displays if required
opportunity for further analysis
• It’s available on X-stream and H drive
CONFERENCE VENUE SELECTION
CRITERIA WEIGHTS VENUE SCORES
Level 1 Level 2 A B C D
Location 0.35
Environment 0.50 0 25 40 100
Access 0.50 100 80 35 0
Facilities 0.45
Staff experience 0.10 100 80 40 0
Conference rooms 0.30 75 100 50 0
Social meeting places 0.15 25 100 0 75
Accommodation 0.20 80 100 0 90
Catering 0.25 60 70 0 100
Cost 0.20
Amounts (£) 9,750 10,000 5,000 7,000
Scores 5 0 100 60
EVALUATION
Location 50.0 52.5 37.5 50.0
Facilities 67.3 90.5 19.0 54.3
Cost 5.0 0.0 100.0 60.0
Overall 48.8 59.1 41.7 53.9
Rank 3 1 4 2
Subjectivity in MCDM
• The role of subjective judgement is highlighted by MCDM in the selection of:
the criteria themselves importance weights achievement scores
• Such judgements are often unreliable, even with expert advice
• To counter this, decision makers often use…
Sensitivity Analysis
• …is a way of testing the robustness of the preferred option against changes in the data / judgements on which the decision is made
• In MCDM, it is wise to test the decision against changes in importance weights and achievement scores
• This may: increase confidence in the preferred option
If there is little change
indicate areas in which further thought/data are needed
If a small change to an input leads to large change in overall scores
Assignment FAQ (1)
• Is the assignment criteria referenced or norm referenced?– Criteria referenced– So – read the criteria!
FAQ (2)
• Does the MCDM model need to “work”?– For the better marks, yes.– A pass mark for this part can be gained by a
well-designed front end only– The more sophisticated the model, the better
the mark is likely to be– Please remember to submit the model on CD
FAQ (3 and 4)
• Are the word limits sacrosanct?– Yes, but can go 10% above.– (There is no lower limit!)
• When should I start?– You should have already started
FAQ (5)
• How do I do this part: “justify the choice of decision criteria in your model”?– You need to do some research on the sort of
factors that might be taken into consideration.
– Remember to give appropriate citations (Harvard style)
FAQ (6)
• How do I do this part: – “Critically assess each of these technologies
in relation to Bill’s current decision:• Expert systems• Neural networks”?
• Research again needed! (Can use lecture material of course).
FAQ (6) continued
• One possible approach:– Define the technology– Look at problem characteristics discussed in
the relevant lecture– Look at “advantages” and “disadvantages”
discussed in the relevant lecture– Look for any precedents (research!)
FAQ (7 and 8)
• Should the rules show how the amount of benefit is worked out?– Yes
• Should the and/or tree show how the amount of benefit is worked out?– In cut-down mode, yes.– One approach – make the rightmost branch
“calculations done”– There is a more elegant approach – worth 3 marks!
Nota Bene
• The deadline is 1500 on Friday October 24 2008.
• However, this is not really feasible, given the lecture schedule.
• Hence, there is a new deadline:– 1500 on Friday November 7, 2008
Please also note…
• You can still hand in on 1500 on Friday October 24 2008 if you want!
• It remains the case that:– Tempus fugit