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=
mn m m
n
n
x x x
x x x
x x x
X
........
.......
.......
2 1
2 22 21
1 12 11
Criteria
Alternatives
Decision matrix for ranking
11
Steps of TOPSIS
Step 1: Construct normalized decision
matrix.
This step transforms various attribute
dimensions into non-dimensional
attributes, which allows comparisons across
criteria.
Normalize scores or data as follows:
r
ij
= x
ij
/ (Ex
2
ij
) for i = 1, , m; j = 1, , n
i
Normalized decision matrix
(
(
(
(
=
mn m m
n
n
r r r
r r r
r r r
N
........
.......
.......
2 1
2 22 21
1 12 11
Criteria
Alternatives
2
1
2
21
2
11
11
11
........
m
x x x
x
r
+ + +
=
13
Steps of TOPSIS
Step 2: Construct the weighted normalized
decision matrix.
Assume we have a set of weights for each
criteria w
j
for j = 1,n.
Multiply each column of the normalized
decision matrix by its associated weight.
An element of the new matrix is:
v
ij
= w
j
r
ij
Normalized decision matrix
(
(
(
(
=
mn m m
n
n
r r r
r r r
r r r
N
........
.......
.......
2 1
2 22 21
1 12 11
Criteria
Alternatives
w
1
w
2 ..
w
n
Weights
Weighted normalized decision matrix
(
(
(
(
=
mn m m
n
n
v v v
v v v
v v v
V
........
.......
.......
2 1
2 22 21
1 12 11
11 1 11
r w v =
16
Steps of TOPSIS
Step 3: Determine the ideal and negative ideal
solutions.
Ideal solution.
A* = { v
1
*
, , v
n
*
}, where
v
j
*
={ max (v
ij
) if j e J ; min (v
ij
) if j e J' }
i i
Negative ideal solution.
A' = { v
1
' , , v
n
' }, where
v' = { min (v
ij
) if j e J ; max (v
ij
) if j e J' }
i i
17
Steps of TOPSIS
Step 4: Calculate the separation measures for
each alternative.
The separation from the ideal alternative is:
S
i
*
= [ E (v
j
*
v
ij
)
2
]
i = 1, , m
j
Similarly, the separation from the negative ideal
alternative is:
S'
i
= [ E (v
j
' v
ij
)
2
]
i = 1, , m
j
18
Steps of TOPSIS
Step 5: Calculate the relative closeness to the
ideal solution C
i
*
C
i
*
= S'
i
/ (S
i
*
+S'
i
) , 0 < C
i
*
< 1
Select the option with C
i
*
closest to 1.
C
j
*
index value lies between 0 and 1
The larger the index value means the better
the performance of the alternatives
19
Applying TOPSIS Method to
Example
Weight 0.1 0.4 0.3 0.2
Style Reliability Fuel Eco.
Saturn
Ford
7 9 9 8
8 7 8 7
9 6 8 9
Civic
Mazda
6 7 8 6
Cost
20
Applying TOPSIS to Example
m = 4 alternatives (car models)
n = 4 attributes/criteria
x
ij
= score of option i with respect to criterion j
X = {x
ij
} 44 score matrix.
J = set of benefit attributes: style, reliability, fuel
economy (more is better)
J' = set of negative attributes: cost (less is better)
21
Steps of TOPSIS
Step 1(a): calculate (Ex
2
ij
)
1/2
for each column
Style Rel. Fuel
Saturn
Ford
49 81 81 64
64 49 64 49
81 36 64 81
Civic
Mazda
Cost
Ex
ij
2
i
(Ex
2
)
1/2
36 49 64 36
230 215 273 230
15.17 14.66 16.52 15.17
22
Steps of TOPSIS
Step 1 (b): divide each column by (Ex
2
ij
)
1/2
to get r
ij
Style Rel. Fuel
Saturn
Ford
0.46 0.61 0.54 0.53
0.53 0.48 0.48 0.46
0.59 0.41 0.48 0.59
Civic
Mazda
0.40 0.48 0.48 0.40
Cost
23
Steps of TOPSIS
Step 2 (b): multiply each column by w
j
to
get v
ij
.
Style Rel. Fuel
Saturn
Ford
0.046 0.244 0.162 0.106
0.053 0.192 0.144 0.092
0.059 0.164 0.144 0.118
Civic
Mazda
0.040 0.192 0.144 0.080
Cost
24
Steps of TOPSIS
Step 3 (a): determine ideal solution A*.
A* = {0.059, 0.244, 0.162, 0.080}
Style Rel. Fuel
Saturn
Ford
0.046 0.244 0.162 0.106
0.053 0.192 0.144 0.092
0.059 0.164 0.144 0.118
Civic
Mazda
0.040 0.192 0.144 0.080
Cost
25
Steps of TOPSIS
Step 3 (a): find negative ideal solution A'.
A' = {0.040, 0.164, 0.144, 0.118}
Style Rel. Fuel
Saturn
Ford
0.046 0.244 0.162 0.106
0.053 0.192 0.144 0.092
0.059 0.164 0.144 0.118
Civic
Mazda
0.040 0.192 0.144 0.080
Cost
26
Steps of TOPSIS
Step 4 (a): determine separation from ideal
solution A* = {0.059, 0.244, 0.162, 0.080}
S
i
*
= [ E (v
j
*
v
ij
)
2
]
Saturn
Ford
0.000845 0.029
0.003208 0.057
0.008186 0.090
Civic
Mazda 0.003389 0.058
28
Steps of TOPSIS
Step 4 (b): find separation from negative ideal
solution A' = {0.040, 0.164, 0.144, 0.118}
S
i
' = [ E (v
j
' v
ij
)
2
]
Saturn
Ford
0.006904 0.083
0.001629 0.040
0.000361 0.019
Civic
Mazda 0.002228 0.047
30
Steps of TOPSIS
Step 5: Calculate the relative closeness to
the ideal solution C
i
*
= S'
i
/ (S
i
*
+S'
i
)
S'
i
/(S
i
*
+S'
i
) C
i
*
Saturn
Ford
0.083/0.112 0.74 BEST
0.040/0.097 0.41
0.019/0.109 0.17
Civic
Mazda 0.047/0.105 0.45
Selection of 3PL provider
XYZ company is the industry leader in the
manufacture of automobile safety products
Produces airbags, seatbelts, steering wheels, and
safety electronics
Companys managers believe that establishing a
flexible and scalable logistics outsourcing
network with 3PL providers will be a key element
in achieving lower costs, responsiveness to
market and enhanced flexibility
To find best among A1, A2, A3, A4, and A5 3PL
providers
Methodology
A two-phase AHP and TOPSIS methodology is
developed to realize the evaluation.
The weights that are gained from AHP
calculations are considered and used in
TOPSIS calculations.
Then TOPSIS is operated for the evaluation
problem and the final ranking of the
preference order for the potential five 3PL
providers are gained
Relative weights of five alternatives
with respect to each weights of sub-
criterion (fromAHP)
The Normalized Decision Matrix
2
1
2
21
2
11
11
11
........
m
x x x
x
r
+ + +
=
The Normalized Decision Matrix
0.048 0.045 0.124 0.062 0.055 0.105 0.056 0.154 0.131 0.092 0.046 0.083 Weights
The Weighted Normalized
Decision Matrix
The ideal solution A* and negative ideal
solution A
-
Results of TOPSIS