W8_Rotimi_Decision Making using Multi-Attribute Decision Analysis

1.    Problem Definition:

Continuing from Weeks 6 & 7 Blogs on the provision of alternative power to supplement public power support that will support company operations

I have analysed this problem using the NPV (W6), Benefit-Cost ration Method (W7).

 I am now applying Multi-Attributes Decision Making principle to the same problem

 

2.    Development of Feasible Alternatives

To supplement the public mains, there are 2 mutually exclusive feasible alternatives as in W6 and W7 blogs

·         50 KVA Inverter

·         60 KVA Electric Generator

 

3.    Development of Outcomes and cash flows for each alternative

TO aid the selection of the most suitable alternative using Multi-attribute decision making as our tool of choice, I will be deploying NON-COMPENSATORY, FULL DIMENSION ANALYSIS although the issue is an Intermediated Dimensional one.  I will be using;

·         Dominance Model

·         Satisficing Model

·         Disjunctive Resolution Model

·         Lexicography Model

 

The selected attributes that will be used to discriminate among the feasible alternatives are;

·         Initial Purchase Cost

·         Operating and Maintenance Cost

·         Flexibility (Ability to Increase Capacity)

·         Contribution to Noise Pollution

·         Contribution to Air Pollution

·         Renewable Energy

·         Site Restoration Cost

 

4.    Analysis and comparison of alternatives

 

Dominance Model

S/No	Attribute	50 KVA Inverter	60 KVA Electric Generator	Dominance
1	Initial Purchase Cost	$35,000	$11,000	Generator
2	Operating and Maintenance & Cost	$2,000	$10,000	Inverter
3	Flexibility	Excellent	Poor	Inverter
4	Contribution to Noise Pollution	Very Low	High	Inverter
5	Contribution to Air Pollution	Very Low	High	Inverter
6	Use of Renewable Energy	Excellent	Poor	Inverter
7	Site Restoration Cost	$0,00	$5,000	Inverter

 

Although, the Inverter has dominated regarding the Seven attributes, claiming 6 out of the seven attributes, it cannot determine our choice for the feasible alternatives

 

Satisficing

Satisficing, requires the establishment of minimum or maximum acceptable values (the standard) for each attribute. Alternative having one or more attributes values that fall outside the acceptable limits are excluded from further consideration. See

S/No	Attribute	Maximum Limit	Inverter	Generator
1	Initial Purchase Cost	$15000	Not Acceptable	Acceptable
2	Operating and Maintenance & Cost	$5,000	Acceptable	Not Acceptable

 

There is no need to go further with the remaining attributes as the Two feasible alternatives are disqualified based on the Satisficing Model.

 

Disjunctive Resolution

The disjunctive method is a bit similar to Satisficing in that it relies on computing the attributes of each alternative to an established standard.. If an alternative has just one attribute that meets or exceeds the standard, that alternative is kept.

 

Disjunctive Resolution has brought us back to our problem as each feasible alternative has at least one attribute that is more desirable over the other alternative.

 

Lexicography

This model is particularly suitable for decision situations in which a single attribute is judged to be more important than all other attributes. Lexicography requires that the importance of each attribute be specified to determine the order in which attributes are to be considered.

The order of importance of the attributes are as follows;

                      I.        Overall cost (Capex & Opex)

                    II.        Site Restoration Cost

                   III.        Flexibility

                  IV.        Environmental Pollution         

                    V.        Use of Renewable Energy

using the Lexicography Model and choosing overall cost as the most ranked attribute, the total cost of each feasible alternative are as follows

·         50 KVA Inverter:         Capex                         $35,000.00

                                    Opex (8 Years)           $40,000.00

                                    Restoration Cost         $  0,000.00

Total                                                                $75,000.00

 

·         60 KVA Generator:     Capex                         $11,000.00

                                    Opex                           $80,000.00

                                    Residual Value           ($ 1,700.00)

                                    Site Restoration Cost  $5.000.00

Total                                                                94,300.00       

 

Making a choice, using the Lexicography Model and using the minimum overall cost of the Two alternatives as the most important attribute, the Inverter will be the best choice because its lifecycle cost is $19,300 ($94,300 - $75,000) less than the life cycle cost of the electric generator

                                   

5.    Selection criteria

a)         Out come of the use of Multi-Attribute Decision Analysis

 

 

6.    Selection of preferred alternative

The selection of the preferred alternative is based on the Lexicography model.

The other Dominance Model, Satisficing Model and Disjunctive Resolution Model has not been so clear in helping me decide on the best alternative based on the Multi-Attribute Decision Analysis.

 

7.    Performance Measurement and Post Evaluation Results.

After comparing the models under non-compensatory intermediate dimension analyis, it is only the Lexicography model that is on assistance in decision making, regarding this case.

 

 

References

1.    Sullivan, W., Wicks, E., Koelling, P., Kumar, p., & Kumar, N. (2012). Engineering economy (15^th edition). England: Pearson Education Limited. Decison Making Comparing Multiple Alternatives

2.    Tzeng G & Huang J (2011). Taylor and Francis Group. Multiple Attribute Decision Making Methods & Applications. Retrieved from http://books.google.co.uk/books