Application of AHP and Taguchi loss functions in evaluation of advanced manufacturing technologies

The purpose of this study is the development of a decision model to help decision makers with their technology selection. Evaluation and selection of a new technology is a multi-criteria decision making process encompassing various tangible and intangible factors. Thus, the identification of these factors and a thorough analysis of the impact, both positive and negative, on the organization should be included in the evaluation technique. Therefore, the first step is the identification of the pertinent factors. To accomplish this both risks and benefits of implementing a new technology are identified. Once pertinent risks and benefits are identified a mechanism for analysis of these factors is developed. Taguchi loss function is used to measure performance of each technology candidate with respect to the risk and benefit categories. Appropriate Taguchi loss functions are formulated based on the target value and the specification limits set by the decision maker. Analytic Hierarchy Process (AHP) is used to determine the relative importance of the risks and benefits to the decision maker. The weighted loss scores are calculated for each technology alternative by using the relative importance as the weights. The composite weighted loss scores are then calculated and used for ranking of the technology alternatives. The technology with the smallest composite loss score is recommended for adoption.