Multicriteria Decision Aid Approach Research Articles

A credit ranking model for a parafinancial company based on the ELECTRE-III method and a multiobjective evolutionary algorithm

Credit rating is an assessment performed by lenders or financial institutions to determine a person’s creditworthiness based on the proposed terms of the loan. Frequently, these institutions use rating models to obtain estimates for the probabilities of default for their clients (companies, organizations, government, and individuals) and to assess the risk of credit portfolios. Numerous statistical and data mining methods are used to develop such models. In this paper, the potential of a multicriteria decision-aiding approach is studied. As a first step, the proposed methodology models the problem as a multicriteria evaluation process with multiple and in some cases, conflicting dimensions, which are integrated to derive sound recommendation for DMs. The second step of the methodology involves building a multicriteria outranking model based on ELECTRE III method. An evolutionary algorithm is used to exploit the outranking model. The methodology is applied to a small-scale financial institution operating in the agricultural sector. We compare loan applications based on their attributes and the credit profile of the customer or credit applicant. Our methodology offers the flexibility of combining heterogeneous information together with the preferences of decision makers (DMs), generating both relative and fixed rules for selecting the best loan applications among new and existing customers, which is an improvement over traditional methods The results reveal that outranking models are well suited to credit rating, providing good ranking results and suitable understanding on the relative importance of the evaluation criteria.

MULTICRITERIA DECISION AID TO IMPLEMENT AN ON-FARM STORAGE SYSTEM FOR SOYBEANS

ABSTRACT : Implementing an on-farm storage system for agricultural products becomes a complex decision problem when considering risks, benefits, uncertainties and alternatives. This study aimed at applying the multicriteria decision aid (MCDA) approach to select the infrastructure to be implemented, taking into account variables and farmer’s goals. As a result, we concluded that the adopted approach was useful since it allowed a better understanding of the problem and provided decision-making support. KEYWORDS : grain storage, investment, multicriteria decision aid. INTRODUCTION Implementing an on-farm grain storage system is a complex decision problem because it covers several variables of significant uncertainty level, such as price fluctuations, freight costs, logistics, opportunity cost, strategies of utilization for a storage system and interest rate. Additionally, “grain production in Brazil has increased at an astounding rate, culminating in record harvests”, but “a few Brazilian regions show a critical situation regarding their storage systems” (AGUIAR, 2013), as well as transport and shipping deficiencies (MACHADO, 2013). It is noteworthy that there is no consensus on the static storage capacity required for the country, and several authors support the FAO’s recommendation (Food and Agriculture Organization), which is 120% of the annual grain production in the country (GALLARDO et al., 2010). In the case of soybean, Brazil barely hold stocks and currently “almost all soybean produced is exported or consumed” (CONAB, 2015). Thus, it is of major importance to consider specific characteristics concerning grain production and transport in Brazil, while assessing a storage system implementation. The first aspect to consider is the “soybean market and the factors that can impact on supply and demand” (BARBOSA & VIEIRA, 2013). Brazil has a strong exporting agriculture and its main commodity is soybeans. However, its storage seems to be commercially not interesting because “in Brazil and in the other countries in the Southern Hemisphere harvest extends from March to May, while in the Northern Hemisphere it takes place in September/October (in the United States)”. Thus, “Brazilian preferential export period” occurs from “May to August, i.e., prior to American crop harvest” (FERREIRA et al., 1993). In addition to occurring during North American off-season, seasonal price changes preclude Brazilian harvest storage (TOMAZELA, 2010), and might become a risk due to their high volatility. Therefore, it is important to consider additional benefits, or “utility gains” (“convenience yield”), warranting storage (POYNDER, 1999). Another important variable is interest rate. In addition to stand for “opportunity cost of product storing” (FERREIRA et al., 1993), if too high, it can make impractical to finance new static capacity expansion projects (WEBBER, 2011), or even derail the operation of existing warehouses, as occurred with public structures that have been “disabled by activity change or scrapping” during the 1990s (FERNANDES & ROSALEM, 2014). In this context, it is highlighted that the return on

A Multicriteria Decision Model for Collaborative Partnerships in Supplier Strategic Management

Maintaining relationships with suppliers has become a critical strategic management issue to business. As a consequence, the tasks of evaluating and selecting suppliers are essential, given that companies delegate part of their business to partners. The main purpose of these tasks is to identify suppliers with the highest potential for meeting a buyer’s needs consistently and at an acceptable overall performance. However these tasks are complex since they involve a variety of conflicting criteria, which makes the problem one that can be tackled by an multicriteria decision aid (MCDA) approach. Moreover, companies have suppliers whose features and performance are different and buyers need to decide at each level how they may best collaborate with each type of supplier. Many papers in the literature have addressed this situation involving supplier selection; nevertheless, most of them present methods to solve ranking and choice problems. The objective of this paper is to propose a model for the strategic management of suppliers which uses the ELECTRE TRI method to sort suppliers into classes of collaboration. Therefore, by using this model it is possible for companies to do so in order to define the most appropriate strategies to adopt for each category.

A multilevel and multistage efficiency evaluation of innovation systems: A multiobjective DEA approach

Evaluating the efficiency of innovation systems can serve as a substantial enabling tool for policymaking serving to identify best practices and develop potential improvements of actions and strategies. It also serves to provide valuable insight in understanding the nature and dynamics of innovation process at its different stages and levels. The main aim of the paper is to present an integrated assessment and classification framework for national and regional innovation efficiency. The proposed model is based on Data Envelopment Analysis and is formulated as a multiobjective mathematical program in order to consider the objectives and constraints of the different stages and levels of the innovation process. Additionally, the model copes with DEA inconsistencies when ratio measures are employed. In the second part of the study, a multicriteria decision aid approach, based on an ordinal regression model, is applied in order to study how environmental factors on innovation and entrepreneurship affect the estimated efficiency scores. The proposed approach is applied to a set of 23 European countries and their 185 corresponding regions. The results show that there are large differences regarding the efficiency scores of the different stages and levels, implying the existence of significant divergences from the expected norm concerning innovation efficiency. The contribution of the paper lies (i) in the proposed multiobjective model, which is able to model the multiple stages and levels of the innovation process and handle ratio measures without requiring the same set of inputs and outputs at different levels and (ii) in the presented application of the model in the efficiency evaluation of innovation systems, including a meta-analysis of the results based on the framework of the Quadruple Innovation Helix. Such an approach may provide a valuable tool for country/region comparison and policy formulation.

Assessment of a Brazilian public hospital’s performance for management purposes: A soft operations research case in action

Brazil’s public health management system has undergone substantial restructuring over the past decade. One of the consequences of this restructuring is the establishment of a new relationship between the Ministry of Health (MS) and the Ministry of Education (MEC) regarding the funding of Federal University Hospitals. The Brazilian Ministry of Health has implemented a certification process for the University Hospitals that requires meeting a set of financial, managerial, and educational processes related goals, and adoption of an assistance model. This article uses the MultiCriteria Decision Aid (MCDA) approach to support the development of a model that can help the university hospitals’ managers assess their institutional performance to meet their joint goals with the MS/MEC and obtain the certification. This case study was conducted at a hospital within the Brazilian federal education network.

The challenge of selecting and evaluating third-party reverse logistics providers in a multicriteria perspective: a Brazilian case

Following recent legislations and public policies on solid waste and product take-back, companies in Brazil are now impelled to incorporate reverse logistics practices in their business processes. The Brazilian National Policy of Solid Waste – NPSW, approved in 2010, obligates companies to implement reverse logistics. Considering this, many companies in Brazil have studied the possibility to outsource these activities by engaging third-party reverse logistics providers – 3PRLP. Considering these demands, it is important to define which systematic approaches can be used to select the most suitable 3PRLP. The objective of this article is to identify the main criteria, the systematic methods that can be used in order to select the most appropriate 3PRLP and also propose a framework based in multicriteria decision aid approach to select 3PRLP. Thus, a Systematic Literature Review was carried out and a conceptual framework for decision making in this context using Multicriteria Decision Aid – MCDA modeling was proposed. Therefore, this paper presents two contributions: i) a SLR covering the past decade based on the MCDA experiences in 3PRLP selection, highlighting the main criteria and systematic approaches used; ii) based on this SLR, a proposal for a conceptual methodological framework to help decision makers and researchers in performing a MCDA in the area of 3PRLP selection.

Multicriteria framework for selecting a process modelling language

The choice of process modelling language can affect business process management (BPM) since each modelling language shows different features of a given process and may limit the ways in which a process can be described and analysed. However, choosing the appropriate modelling language for process modelling has become a difficult task because of the availability of a large number modelling languages and also due to the lack of guidelines on evaluating, and comparing languages so as to assist in selecting the most appropriate one. This paper proposes a framework for selecting a modelling language in accordance with the purposes of modelling. This framework is based on the semiotic quality framework (SEQUAL) for evaluating process modelling languages and a multicriteria decision aid (MCDA) approach in order to select the most appropriate language for BPM. This study does not attempt to set out new forms of assessment and evaluation criteria, but does attempt to demonstrate how two existing approaches can be combined so as to solve the problem of selection of modelling language. The framework is described in this paper and then demonstrated by means of an example. Finally, the advantages and disadvantages of using SEQUAL and MCDA in an integrated manner are discussed.

Selección de Estrategias de Mejoramiento de las Condiciones de Trabajo para la Función Mantenimiento Utilizando la Metodología MCDA Constructivista

It’s presented an analysis tool in order to define which strategies are most suitable for to be implemented, which would lead to an effective change in the actual working conditions for the people who are in charge of the maintenance function in a productive organization. To this purpose tools of the Constructivist Multicriteria Decision Aid Approach (MCDA) to organize and synthesize the information gathered from the maintenance working team, the DEMATEL model (Decision Making Trial and Evaluation Laboratory) to prioritize the defined strategies and the regression analysis as a tool for monitoring the evolution of the actions that will be part of the strategies. The most important aspect of this procedure is that the definition of the strategies comes from the same people who work in the maintenance area, fact which makes that the commitment with the successful implementation of such strategies be very high.

Multi-criteria decision aid approach for the selection of the best compromise management scheme for the treatment of municipal solid waste in Morocco

The Municipal Solid Waste (MSW) in developing countries is generally badly controlled and badly managed. Because of the environmental problems bound to this problem, many countries established their national legislation to determine types of reuse, recycling and treatment of waste, to apply the appropriate solutions. In this study, alternate schemes are examined and analysed aiming at the improvement of MSW management in Morocco. These schemes are estimated by developing and applying the Preference Ranking Organisation Method for Enrichment Evaluation (PROMETHEE) method consisting in a multi-criteria analysis of the parameters and the constraints bound to the financial, technical, environmental and social aspects. Thus, 18 alternate management schemes were compared and ranked according to their performance and their efficiency. The obtained results will certainly help the Decision- Makers (DMs) to make a decision for the best waste management scheme, which hold in account particularities of every region, commune or municipality in Morocco.

Enhancing organisational resilience: application of viable system model and MCDA in a small Hong Kong company

The aim of this article is to combine the use of the viable system model (VSM) and a multi-criteria decision aid (MCDA) based on Superiority and Inferiority Ranking methodology for enhancing organisational resilience. VSM is applied to capture the cybernetic strengths and weaknesses of an organisation. The structural arrangements and cybernetic criteria, related to organisational resilience, are identified. In order to evaluate the structural arrangements, MCDA is adopted as a systematic approach for determining the most preferred option. A sample study of a small enterprise in Hong Kong is illustrated, in which the computation of the system-in-focus in the context of viability is based on a set of criteria related to corporate credibility and autonomy-control dilemma. The development of integrated approach using VSM and MCDA could, in the future, serve as a supporting decision-aid tool, which would be used to guide management in their choice of organisational resilience solution. The preliminary result shows that the proposed approach provides management with an objective and systematic means to make organisational resilience decisions by evaluating various structural arrangements of an organisation for achieving adaptation in a changing business environment. Besides, the MCDA approach can be used to enhance the value of VSM.

A Multicriteria Outranking Modeling Approach for Credit Rating

Rating models are widely used by credit institutions to obtain estimates for the probabilities of default for their clients (firms, organizations, individuals) and to assess the risk of credit portfolios. Several statistical and data mining methods are used to develop such models. In this article, the potential of an outranking multicriteria decision-aiding approach is explored. An evolutionary algorithm is used to fit a credit rating model on the basis of the ELimination Et Choix Traduisant la REalite trichotomique method. The methodology is applied to a large sample of Greek firms. The results indicate that outranking models are well suited to credit rating, providing good classification results and useful insight on the relative importance of the evaluation criteria.

A GIS-Based Multicriteria Evaluation for Aiding Risk Management Pinus pinaster Ait. Forests: A Case Study in Corsican Island, Western Mediterranean Region

Forest management can benefit from decision support tools, including GIS-based multicriteria decision-aiding approach. In the Mediterranean region, Pinus pinaster forests play a very important role in biodiversity conservation and offer many socioeconomic benefits. However, the conservation of this species is affected by the increase in forest fires and the expansion of Matsucoccus feytaudi. This paper proposes a methodology based on commonly available data for assessing the values and risks of P. pinaster forests and to generating maps to aid in decisions pertaining to fire and phytosanitary risk management. The criteria for assessing the values (land cover type, legislative tools for biodiversity conservation, environmental tourist sites and access routes, and timber yield) and the risks (fire and phytosanitation) of P. pinaster forests were obtained directly or by considering specific indicators, and they were subsequently aggregated by means of GIS-based multicriteria analysis. This approach was tested on the island of Corsica (France), and maps to aid in decisions pertaining to fire risk and phytosanitary risk (M. feytaudi) were obtained for P. pinaster forest management. Study results are used by the technical offices of the local administration-Corsican Agricultural and Rural Development Agency (ODARC)-for planning the conservation of P. pinaster forests with regard to fire prevention and safety and phytosanitary risks. The decision maker took part in the evaluation criteria study (weight, normalization, and classification of the values). Most suitable locations are given to target the public intervention. The methodology presented in this paper could be applied to other species and in other Mediterranean regions.

Multicriteria Decision Aid to support Multilateral Environmental Agreements in assessing international forestry projects

The three Rio Conventions—the United Nations Framework Convention on Climate Change, the Convention on Biological Diversity, and the United Nations Convention to Combat Desertification—face the challenge to create synergies at different levels. The objective of this article is to describe how we have assessed synergies between the Rio Conventions at the project level in the forest sector. Since the complexity of the decision problem is high, we adopted the Multicriteria Decision Aid approach, which can provide a broad insight into the decision problem and find a compromise solution to a problem with multidimensional and conflicting criteria including social, economic and environmental features. The ELECTRE TRI model was used for assessing synergies at the project level, and has been a useful tool to quantify the performance of afforestation and reforestation projects into three categories (synergistic, reasonably synergistic, and not synergistic). For the first time, afforestation and reforestation projects have been assessed in a comprehensive way through decision criteria that reflect global and local interests using a non-compensatory multicriteria method.

Urban stormwater drainage management: The development of a multicriteria decision aid approach for best management practices

Multicriteria analysis methods have been used over the past decade for resolving environmental issues. This paper deals with the application of a multicriteria analysis (MCA) approach to urban stormwater drainage management. Stormwater source control has become a popular alternative solution for managing stormwater in urban areas. Source control constitutes one variant of best management practices (BMPs) that can be evaluated with respect to various criteria, including: hydraulic efficiency, pollution retention, environmental impact, operation and maintenance, economic investment, and social and sustainable urban living. A French survey was undertaken to assess the performance of different BMPs at the national scale; results highlight the main reasons justifying the use of BMPs. These reasons are primarily related to flood prevention, which far outweighs the economic incentives. Moreover, hydraulic and technical aspects are most frequently noted by users, whereas operation and maintenance aspects are often seen as obstacles to application of these techniques. The survey results, completed by a literature review and expert statements, have been used to establish a matrix of alternatives for multicriteria analysis. The MCA results obtained allow ranking the various alternatives from best to worst, taking into account the different strategies adopted by the decision-makers involved. The development of a multicriteria approach could, in the future, serve as a supporting decision-aid tool, whose purpose would be to guide users in their choice of stormwater source solution.

Multi-criteria decision aid approach for the selection of the best compromise management scheme for ELVs: The case of Cyprus

Each alternative scheme for treating a vehicle at its end of life has its own consequences from a social, environmental, economic and technical point of view. Furthermore, the criteria used to determine these consequences are often contradictory and not equally important. In the presence of multiple conflicting criteria, an optimal alternative scheme never exists. A multiple-criteria decision aid (MCDA) method to aid the Decision Maker (DM) in selecting the best compromise scheme for the management of End-of-Life Vehicles (ELVs) is presented in this paper. The constitution of a set of alternatives schemes, the selection of a list of relevant criteria to evaluate these alternative schemes and the choice of an appropriate management system are also analyzed in this framework. The proposed procedure relies on the PROMETHEE method which belongs to the well-known family of multiple criteria outranking methods. For this purpose, level, linear and Gaussian functions are used as preference functions.

Improving pluralism in Multi Criteria Decision Aid approach through Focus Group technique and Content Analysis

Various economic valuation techniques and Multi Criteria Decision Aid (henceforth MCDA) methods seek to identify and evaluate the environmental impacts in aquatic ecosystems for the improvement of the decision making process. Despite the latter's ability to respond more effectively to the task of confronting environmental problems thanks to its multidimensional structure, strong criticism is levelled against the obscurity prevalent in the way the social preferences are elicited and certain criteria and weights are adopted. In the present paper, the Focus Group technique, complemented by Content Analysis, are applied in order to strengthen the pluralistic concept of MCDA approach and enhance the social learning in decision making processes. The analysis was accomplished within the framework of the EUROCAT project (European Catchments: Catchments Changes and their impacts on the coast), and was applied to the delta area of the Axios transboundary river in Northern Greece.

Evaluating the financial performance of agri-food firms: a multicriteria decision-aid approach

Food economists and financial researchers have long been preoccupied by the issue of evaluating the performance of agri-food firms. As the financial restructuring of the agri-business sector during the past two decades or so reflects sweeping changes that have occurred worldwide, questions have arisen regarding the application of the most suitable financial decision-making tools. This paper introduces a new financial decision aid approach, which is based on data analysis techniques in combination with a multicriteria analysis method (PROMETHEE II). Several notions and concepts forming the financial engineering methodological framework are adopted for the design of this approach. For illustrative purposes, the case of Greek agri-businesses is used. The analysis results in an overall ranking of the examined firms’ performance. Finally, given the limitations of the current study, a research agenda is proposed.

Use of multi-criteria decision-aids for risk zoning and management of large area subjected to mining-induced hazards

The end of iron-mining operations in France's Lorraine region has raised the problem of post-mining management. Collapses and subsidence have recently occurred in this region, which focused on the necessity to develop a specific methodology for risk zoning. The proposed methodology is based on the multi-criteria decision-aid approach called ‘ELECTRE TRI’, with aim to assign zones at risk into predefined classes. It allows experts opinions, qualitative and quantitative criteria and uncertainties to be taken into account.

Parametrical mechanical design with constraints and preferences: application to a purge valve

In the design of mechanical structures, the evolutionary algorithms have taken a more and more important place, mostly because of their ability to explore widely the design space. Furthermore, as several objectives are often pursued simultaneously in industrial applications, multiobjective optimization has become a wide area of research in recent years. However, only a few methods integrate a multicriteria decision aid approach to reflect the user’s preferences since the beginning of the search process. In this paper, PROMETHEE II, an outranking method developed in the operational research field, has been implemented in an evolutionary algorithm. Furthermore, as the handling of the constraints is very critical, an original technique called PAMUC ( Preferences Applied to MUltiobjectivity and Constraints) is proposed to tackle simultaneously the constrained and multiobjective aspects. It has been validated on standard test cases, and applied to the design optimization of two valves of the Vinci engine (from launcher Ariane 5). Results analyzed thanks to the R1 norm introduced by Hansen and Jaszkiewicz show that PAMUC outperforms the classical weighted-sum method (combined with a dynamic penalty-based technique to handle the constraints), and therefore seem to be more appropriate to reflect the user’s preferences.

Multi-group discrimination using multi-criteria analysis: Illustrations from the field of finance

The primary objective in the discrimination problem is to assign a set of alternatives into predefined classes. During the last two decades several new approaches, such as mathematical programming, neural networks, machine learning, rough sets, multi-criteria decision aid (MCDA), etc., have been proposed to overcome the shortcomings of traditional, statistical and econometric techniques that have dominated this field since the 1930s. This paper focuses on the MCDA approach. A new method to achieve multi-group discrimination based on an iterative binary segmentation procedure is proposed. Five real world applications from the field of finance (credit cards assessment, country risk evaluation, credit risk assessment, corporate acquisitions, business failure prediction) are used to illustrate the efficiency of the proposed method as opposed to discriminant analysis.