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Dr. Greg ParnellVirginia Commonwealth University

Phone: 804-828-1301, ext. 133

Email: gparnell@vcu.edu

&

Toffler Associates

Phone:978-526-2444, Ext 210

Email: gparnell@toffler.com

March 1999

Introduction to Multiobjective Decision Analysis

Virginia Commonwealth UniversityToffler Associates ®

Complex Policy Decisions

• Complex policy decisions involve many objectives (values).• Multipleobjective decision uses these objectives to identify and evaluate future decision opportunities.

• Qualitative and quantitative value model are the key tools.

ValuesWhat do we want?

InformationWhat do we know?

AlternativesWhat can we do?

Future

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Overview• Introduction

– Terminology– Decision Analysis Tenets– Scope of Decision Analysis

• Illustrative Example– Environmental Remediation

• Decision Analysis – Applications– Professional Organizations – Decision Analysis References

• Decision Analysis Summary

Introduction• Decision: An irrevocable allocation of

resources

• Decision Analysis: Discipline for evaluating complex alternatives by systematically examining

- decisions

- uncertain variables

- preferences (value, risk, & time)

• Purpose: Provide insight to decision-makers faced with hard problems

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Decision Analysis Tenets• Quality decision-making requires a

systematic process to incorporate– Information, expert opinion, and

preferences

• Complex decisions in large organizations involve – Functional experts (inside)

• R&D, engineers, operations, production, finance, etc.

– Interested stakeholders (outside)• stockholders, government, community, etc.

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Decision Analysis Tenets (Con’t)• Quantification offers significant

benefits– Clarifies thinking

• Values• Uncertainties (Probability)• Consequences

– Improves communications– Enables logical reasoning

• Support decision-maker judgments

Provide insights!

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Scope of Decision AnalysisMethodology ____________________________________X______ Descriptive Prescriptive Decision Difficulty _________________________________ X_______ Easy Hard

Problem Structure ___________________________________X_______ Known/Simple Unknown/Complex

Problem Variables ____X_____________________________X________ Deterministic Uncertain

Objectives ____X_______________________________X________ Single Multiple

Risk __________________X________________X_________Low High

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Multiobjective Value Model

• Value model has two parts: Qualitative and Quantitative– Qualitative -most important evaluation considerations & measures

• Use terms most appropriate for the domain

– Quantitative - scoring functions (measure returns to scale) and weights (measure relative importance) used to evaluate alternatives

E va lu a tionC on s id era tion 1

O b jec tive 1

E va lu a tionM easu re 2

O b jec tive 2 O b jec tive 3

E va lu a tionC on s id era tion 2

E va lu a tionC on s id era tion 3

F u n d am en ta lO b jec tive

0

2

4

6

8

10

0 20 40 60 80 100

Evaluation Measure

Value

Project

Current

BestQualitative Value Model Quantitative Value Model

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Illustrative Value Model

Ability to Construct and Operateweight = 1/2

Reliability and Availabilityweight = 1/2

Technical Feasibilityweight = 1/3

Availability of Equipmentand Servicesweight = 1/2

Availability of Storageand Disposal Services

weight = 1/2

Availability of Services and Materialsweight = 1/3

Administrative Feasibilityweight = 1/3

Implementabilityweight = 1/6

Time to Remediateweight = 1/4

Community Protectionweight = 1/4

Worker Protectionweight = 1/4

Animal Impactweight = 1/2

Plant Impactweight = 1/2

Environmental Impactsweight = 1/4

Short-Term Eff.weight = 1/6

Magnitude of Residual Riskweight = 1/2

Degree of Management Requiredweight = 1/2

Reliability of Managerial Controlsweight = 1/2

Adequacy & Reliability of Controlsweight = 1/2

Long-Term Eff.weight = 1/4

Amount of Principal Threat Treatedweight = 1/3

Irreversibilityweight = 1/3

Reduction of Toxicityweight = 1/3

Mobility to Airweight = 1/2

Mobility to Groundwaterweight = 1/2

Reduction of Mobilityweight = 1/3

Volume of Principal Threatweight = 1/2

Volume of Treatment Residualweight = 1/2

Reduction of Volumeweight = 1/3

Reduction of Toxicity, Mobility, or Volumeweight = 1/3

Reduction of Toxicity,Mobility,or Volume

weight = 1/4

Costweight = 1/6

CERCLACriteria

Evaluation Measures

Sub-Criteria

Grelk,B. J., Kloeber, J. M., Jackson, J. A., Parnell, G. S., and Deckro, R. F., “Quantifying CERCLA Using Site Decision Maker Values,” Remediation, Spring 1998, pp. 87-105

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TrainTrain 15Train 23Train 21Train 19Train 12Train 9Train 10Train 7Train 6Train 4Train 11Train 8Train 14Train 26Train 5Train 3Train 25Train 27Train 28Train 1Train 24Train 22Train 2Train 20Train 18Train 17Train 16

Value 7.1 6.8 6.7 6.6 6.0 5.9 5.9 5.9 5.8 5.8 5.7 5.6 5.6 5.6 5.5 5.4 5.3 5.3 4.9 4.8 4.8 4.7 4.6 4.5 4.4 4.4 4.1

Category

+

++++++

+

+

Implementability Short-Term Eff Long-Term Eff Reduction of TMV Cost

MonitoringMCSISTVaultsGroutEST

IST & ISG w/o excavation

SVE and cap

Grout w/o excavation

+

Colors highlight the differences in the alternatives.

Environmental RemediationAlternative Rankings

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0

1

2

3

4

5

6

7

8

0 200 400 600 800 1000 1200 1400 1600 1800 2000

NPV ($ Millions)

13 Vaults

Monitoring

MCS

IST

Grout

EST

012345678

0 100 200 300 400 500

NPV ($ Millions)

Monitoring

MCS

IST

Vaults

Grout1

12, 6, 923 15

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Without analysisHighest cost/good value alternative selected on similar project

After analysis:Highest value - affordable costalternative preferred

Value vs. Cost

Value versus cost plots provide insight on the alternatives.

DA Has Many Successful Applications

• Private– Automotive

• General Motors• Ford

– Oil & Gas• Chevron• Phillips Petroleum

– Pharmaceutical• Eli Lilly

– R&D Portfolios

– etc.

• Public– DoD

• Air Force• Army• Navy

– DOE• Nuclear Waste• Hazardous Chemicals

– Public Utilities

– NASA

– etc.

Welcome to DAWeb, the web site of the Decision Analysis Society of INFORMS. The Society promotes the development and use of logical methods for the improvement of decision-

making in public and private enterprise. Such methods include models for decision-making under conditions of uncertainty or multiple objectives; techniques of risk analysis and risk assessment; experimental and descriptive studies of decision-making behavior; economic

analysis of competitive and strategic decisions; techniques for facilitating decision-making by groups; and computer modeling software and expert systems for decision support. Our

members include practitioners, educators, and researchers with backgrounds in engineering, business, economics, statistics, psychology, and other social and applied sciences.

News and Announcements

The Field of Decision Analysis (references, journals, software,...)

Activities and Services of the Society

Officers and Council

Membership Directory

Newsletter Archive

Working Paper Abstract Archive

Upcoming Events and Meetings

How to Join Us

Related Links

Our web address is www.informs.org/Society/DA

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Decision Analysis References• Bodily, S. E., Guest Editor, "Special Issue: Decision & Risk Analysis," Interfaces, Vol 22, No 6, 1992, pp. 1-

166. [13 articles]

• Brown, R. V., & J. Ulviva, "Decision Analysis Comes of Age," Harvard Business Review, Sept-Oct 1982, pp. 130-141.

• Buede, D. "Aiding Insight III," OR/MS Today, August 1996, pp. 73-79. [Annual survey of DA software]

• Clemen, R., Making Hard Decisions, 2nd Edition, Duxbury Press, 1996.

• Corner J. L. and Kirkwood, K. W., “Decision Analysis Applications in the Operations Research Literature, 1970-1989,” Operations Research, Vol 39, No 2, March- April 1991, pp. 206-219.

• Howard, R. A., "Decision Analysis: Practice and Promise," Management Science, Vol 34, 1988, pp. 679-695.

• Howard, R. A. & J. E. Matheson, Editors, The Principles & Applications of Decision Analysis, 1983, Volumes I & II, Strategic Decisions Group.

• Keeney, R.L. Value-Focused Thinking: A Path to Creative Decisionmaking. Cambridge, Massachusetts: Harvard University Press, 1992.

• Keeney, R.L. and Raiffa H. Decision Making with Multiple Objectives Preferences and Value Tradeoffs. New York: Wiley, 1976.

• Kirkwood, C. W., Strategic Decision Making: Multiobjective Decision Analysis with Spreadsheets, Belmont, California: Duxbury Press, 1997.

• Matheson, D. & Matheson, J., The Smart Organization: Creating Value Throught Strategic R&D, Harvard Business School Press, 1998

• Raiffa, H. Decision Analysis: Introductory Lectures on Choices Under Uncertainty, Addison-Wesley Publishing Co., 1968.

• Tversky, A., & D. Kahneman, "The Framing of Decisions & the Psychology of Choice," Science, 1981, Vol 211, 453-458.

• Van Winterfeldt, D., & W. Edwards, Decision Analysis & Behavioral Research, Cambridge University Press, 1986

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Decision Analysis References• Parnell, G., Lutz, L., Engelbrecht, J., Szafranski R., Bennett, E., & Yockey, J., “Improving Customer Support

Decision Making at the National Reconnaissance Office”, submitted to Interfaces, October, 1998• Delano, G., Parnell, G., Vance, M. & Smith, C., “Quality Function Deployment and Decision Analysis: A R&D

Case Study,” submitted to International Journal of Operations and Production Management, November 1998• Parnell, G., Conley, H., Jackson, J., Lehmkuhl, L, and Andrew, J., “Foundations 2025: A Framework for

Evaluating Future Air and Space Forces," Management Science, 1998, Vol 44, No 10, 1998, pp. 1336-1350• Grelk,B. J., Kloeber, J. M., Jackson, J. A., Parnell, G. S., and Deckro, R. F., “Quantifying CERCLA Using

Site Decision Maker Values,” Remediation, Spring 1998, pp. 87-105• Jackson, J. A., Parnell, G. S., Jones, B. L., Lehmkuhl, L.J., Conley, H., and Andrew, J., "Air Force 2025

Operational Analysis," Military Operations Research, 1997, Vol 3, No 4, pp. 5-21• Hale, G., Jackson, J. & Parnell, G., “Assessing Communications Systems for the Australian Defense Force,”

Asia-Pacific Journal of Operational Research, Vol 14, 1997, pp. 45-67• Papatyi, A. F., Deckro, R. F., Parnell, G. S., Jackson, J. A., & Kloeber, J. M., “Screening Technology Trains

for DNAPL Remediation,” Remediation, Winter 1997, pp. 87-105• Rayno, B., Parnell, G., Burk, R., and Woodruff, B., “A Methodology to Assess the Utility of Future Space

Systems,” Journal of Multi-Criteria Decision Analysis, Vol 6, 1997, pp. 344-54• Stafira, S., Parnell, G., and Moore, J., “A Method for Evaluating Military Systems in a Counterproliferation

Role,” Management Science, Vol 43, No 10, October 1997, pp. 1420-1430• Griggs, B., Parnell, G., and Lehmkuhl, L., “An Air Mission Planning Algorithm Using Decision Analysis and

Mixed Integer Programming,” Operations Research, Vol 45, No 5, September-October 1997, pp. 662-676• Burk, B. and Parnell, G, “Evaluating Future Space Systems and Technologies,” Interfaces, Vol 27, No 3,

May-June 1997, pp. 60-73

Decision Analysis Summary

• Systematic process with well developed set of analysis techniques

• Incorporates information from functional experts and interested stakeholders

• Appropriate technique for identifying and quantifying values and uncertainties

• Provides analysis support to decision-makers• Strong professional society and technical

literature