SUPPORTING BUSINESS DECISIONS A Case Study: Multi-Criteria Decision Modelling.
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Transcript of SUPPORTING BUSINESS DECISIONS A Case Study: Multi-Criteria Decision Modelling.
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SUPPORTING BUSINESS DECISIONS A
Case Study:
Multi-Criteria Decision Modelling
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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
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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
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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”!
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A Hierarchy of Criteria
• Level 1– LOCATION
– FACILITIES
– COST
• Level 2
– Environment– Access
– Staff experience– Conference rooms– Social meeting places– Accommodation– Catering
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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
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A B
C D
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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
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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
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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
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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
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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
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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…
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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
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Assignment FAQ (1)
• Is the assignment criteria referenced or norm referenced?– Criteria referenced– So – read the criteria!
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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
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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
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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)
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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).
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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!)
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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!
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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
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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