An Extension of the AHP Dummy Pivot Modeling Applied to the Restructuring of the Iron and Steel Industry in China

The iron and steel industry of China has a wide distribution structure, which leads to low production efficiency, high resource use, and weak bargaining power among global competitors. A carefully planned and executed restructuring of the industry will provide the enterprise with a competitive advantage. Making the optimal restructuring decisions, however, is not easy because: 1) the decisions involve qualitative measures within a complex and uncertain environment, 2) the alternatives include up to 31 administrative regions, and 3) there are astounding differences in the economic development among the 31 alternatives. The orders-of-magnitude approach of the analytic hierarchy process (OM-AHP) could be a useful method to tackle the first and second challenges. However, this approach does not currently explain how to address the large differences between small items in a cluster and big items in a cluster when there are no medium items between them. A model of OM-AHP with a dummy pivot is proposed to tackle this particular challenge. This approach is then applied in a multicriteria decision making problem to both demonstrate how the proposed approach works and provide a solution for the restructuring of the steel industry in China.