Technique for Order Preference by Similarity to Ideal Solution

(TOPSIS)

Origin and History  development by Kwangsun Yoon and Hwang Ching-Lai – Yoon, K., “System
Selection by Multiple Attribute Decision Making,” Ph. D. Dissertation, Kansas
State University, Manhattan, Kansas, 1980.

Basic Concept  The chosen Alternative should have the shortest distance from the ideal
solution and the farthest from the negative-ideal solution.

Ideal
Solution

Negative It is very difficult to

Ideal justify the selection
Solution of A1 or A2

Decision Matrix  m Project Alternative, n Criteria

C1 C2 C3 C4 C5 C6
P1 X11 X12 X13 . . X1n

P2 X21 X22 X23 . . X2n

P3 X31 X32 X33 . . X3n

X= . . . . . . .

. . . . . . .

. . . . . . .

P4 Xm1 Xm2 Xm3 . . Xmn

Hypothesis
1. Each Attribute in the Decision Matrix takes either monotonically increasing or monotonically
decreasing utility
2. A Set of Weights for the Criteria is required
3. Any Outcome which is expressed in a non-numerical way, should be quantified through the
appropriate scaling technique
Procedures
Step 0: Obtain the decision matrix after using a numerical scale for intangible
Step 1: Construct the Normalized Decision Matrix
Step 2: Construct the Weighted Normalized Decision Matrix
Step 3: Determine Ideal and Negative-Ideal Solutions
Step 4: Calculate the Separation Measure
Step 5: Calculate the Relative Closeness to the Ideal Solution
Step 6: Rank the preference order

Multi-Criteria Project Selection (An Example)

4 Projects:
P1  Project α
P2  Project β
P3  Project γ
P4  Project δ

6 Criterions:

Worst Best
C1  Investment (in RM) : max min

C2  Payback (in years) : max min

C3  NPV (in RM) : min max

C4  Risk (in years) : V high high medium Low v. low

C5  Future growth : v. poor poor medium Good v. good

C6  Similarity to existing business: v. poor poor medium good v. good

Decision Matrix

C1 C2 C3 C4 C5 C6
Project α 320000 2 200000 med. v good med.
Project β 280000 3 180000 low med. med.
Project γ 300000 2 210000 high good v. Good
Project δ 400000 2 200000 Low med. med.
TOPSIS Solution

Step 0: Obtain the decision matrix after using a numerical scale for intangible

Very high 0.0 Very poor

1.0 1.0

High Poor

Advantage Attributes
Disadvantage Attributes

3.0 3.0

Medium 5.0 5.0 Medium

7.0 7.0
Low Good

9.0 9.0

Very low Very good

10.0

Scale for Intangibles (Example)

C1 C2 C3 C4 C5 C6
Project α 32 2 20 5 9 5
Project β 28 3 18 7 5 5
Project γ 30 2 21 3 7 9
Project δ 40 2 20 7 5 5

Decision matrix after using a numerical scale for intangible

Step 1: Construct the Normalized Decision Matrix
To transform the various attribute dimensions into non-dimensional attributes, which allows
comparison across the attributes. Normalize scores or data as follows:

for i = 1, …, m; j = 1, …, n

2
Step 1(a): calculate √∑ 𝑥𝑖𝑗 for each column

2
𝑥𝑖𝑗 =1024+784+900+1600
C1 C2 C3 C4 C5 C6
Project α 1024 4.00 400 25 81 25
Project β 784 6.25 324 49 25 25
Project γ 900 3.24 441 9 49 81
Project δ 1600 4.84 400 49 25 25

xij2 4308 18.33 1565 132 180 156

√∑ 𝑥𝑖𝑗2 65.64 4.28 39.56 11.49 13.42 12.49

= √4308

2
Step 1 (b): divide each column by √∑ 𝑥𝑖𝑗 to get Normalized Decision Matrix

=32/65.64
=30/65.64
=28/65.64
C1 C2 C3 C4 C5 C6
Project α 0.4875 0.4671 0.5056 0.4352 0.6708 0.4003
Project β 0.4266 0.5839 0.4550 0.6093 0.3727 0.4003
rij =
Project γ 0.4571 0.4204 0.5308 0.2611 0.5217 0.7206
Project δ 0.6094 0.5139 0.5056 0.6093 0.3727 0.4003

=40/65.64

Normalized Decision Matrix

Step 2: Construct the Weighted Normalized Decision Matrix

• Adjust weights for each criteria wj for j = 1,…n.

Weightages to Criteria  The priorities or weight to the different criteria may be obtained by:
• Mutual consultations or opinion polls
• Pair wise comparison between criteria
• Establishing a hierarchy of priorities
• Multiply each column of the normalized decision matrix by its associated weight.
• An element of the new matrix is: vij = wj rij

Step 2 (a): Adjust weights for each criteria wj for j = 1,…n.

Criteria 1 = 0.2
Criteria 2 = 0.3
Criteria 3 = 0.1
Criteria 4 = 0.1
Criteria 5 = 0.2
Criteria 6 = 0.1
or :
Weightages matrix (wj) = [0.2, 0.3, 0.1, 0.1, 0.2, 0.1]

Step 2 (b): multiply each Normalized Decision Matrix cell by wj to get Weighted Normalized Decision
Matrix

=0.4875*0.2 =0.4671*0.3
=0.5056*0.1
C1 C2 C3 C4 C5 C6
Project α 0.0975 0.1401 0.0506 0.0435 0.1342 0.0400
Project β 0.0853 0.1752 0.0455 0.0693 0.0745 0.0400
vij = Project γ 0.0914 0.1261 0.0531 0.0261 0.1043 0.0721
Project δ 0.1219 0.1542 0.0506 0.0609 0.0745 0.0400

Weighted Normalized Decision Matrix

 Step 3: Determine Ideal and Negative-Ideal Solutions
 Ideal solution.
A* = { v1* , …, vn*}, where vj* ={ max (vij) if j  J ; min (vij) if j  J' }
J associated with benefit (advantage) criteria
J’ associated with cost (disadvantage) criteria

 Negative ideal solution.

A' = { v1' , …, vn' }, where v' = { min (vij) if j  J ; max (vij) if j  J' }
J associated with benefit (advantage) criteria
J’ associated with cost (disadvantage) criteria

(C1) Investment (in RM)  cost / disadvantage

(C2) Payback (in years)  cost / disadvantage
(C3) NPV (in RM)  benefit / advantage
(C4) Risk (in years)  cost / disadvantage
(C5) Future growth  benefit / advantage
(C6) Similarity to existing business  benefit / advantage

C1 C2 C3 C4 C5 C6
Project α 0.0975 0.1401 0.0506 0.0435 0.1342 0.0400
Project β 0.0853 0.1752 0.0455 0.0693 0.0745 0.0400
Project γ 0.0914 0.1261 0.0531 0.0261 0.1043 0.0721
Project δ 0.1219 0.1542 0.0506 0.0609 0.0745 0.0400
A* 0.0853 0.1261 0.0531 0.0261 0.1342 0.0721
A’ 0.1219 0.1752 0.0455 0.0693 0.0745 0.0400

=min(0.0975;0.0853;0.0914;0.1219)
=max(0.0506; 0.0455; 0.0531; 0.0531)

=max(0.0975;0.0853;0.0914;0.1219) =max(0.0400; 0.0400; 0.0721; 0.0400)

A* = {0.0853, 0.1261, 0.0531, 0.0261, 0.1342, 0.0721}

A’ = {0.1219, 0.1752, 0.0455, 0.0693, 0.0745, 0.0400}
 Step 4: Calculate the Separation Measure
Ideal Separation

Negative Ideal Separation

Step 4 (a): determine separation from ideal solution for each row

2
C1 C2 C3 C4 C5 C6 ∑(𝑣𝑗∗ − 𝑣𝑖𝑗 )  √∑(𝑣𝑗∗ − 𝑣𝑖𝑗 )2 

Project α 0.000149 0.000196 0.000006 0.000303 0.000000 0.001026 0.00168 0.041

Project β 0.000000 0.002406 0.000058 0.001863 0.003556 0.001026 0.00826 0.094
Project γ 0.000037 0.000000 0.000000 0.000000 0.000889 0.000000 0.00093 0.030
Project δ 0.001337 0.000786 0.000006 0.001212 0.003556 0.001026 0.00792 0.089

= √0.00792
= (0.001337 + 0.000786 + 0.000006 +
= (0.1219-0.0835)2 0.001212 + 0.003556 + 0.001026)

Step 4 (b): determine separation from negative ideal solution for each row

2
C1 C2 C3 C4 C5 C6 ∑(𝑣𝑗∗ − 𝑣𝑖𝑗 )  √∑(𝑣𝑗∗ − 𝑣𝑖𝑗 )2 

Project α 0.000594 0.001227 0.000026 0.000663 0.003556 0.000000 0.0061 0.078

Project β 0.001337 0.000000 0.000000 0.000000 0.000000 0.000000 0.0013 0.037
Project γ 0.000929 0.002406 0.000058 0.001863 0.000889 0.001026 0.0072 0.085
Project δ 0.000000 0.000442 0.000026 0.000070 0.000000 0.000000 0.0061 0.078

= √0.0061
= (0.000000 + 0. 000442+ 0. 000026+
= (0.1219-0.121935)2 0. 000070+ 0. 000000+ 0. 000000)
Step 5: Calculate the Relative Closeness to the Ideal Solution

Si* +S'i S'i / (Si* +S'i )

Project α 0.12 0.66

Project β 0.13 0.28

Project γ 0.12 0.74

Project δ 0.12 0.66

Step 6: Rank the preference order

A set of alternatives can now be preference ranked according to the descending order of Ci

TOPSIS ranking  Project γ, Project α, Project δ, Project β

 Simple Additive Weighting (SAW)

Step 0: Obtain the decision matrix after using a numerical scale for intangible
Step 1: Obtain the normalized decision matrix using
rij = xij / xj* ; if the jth criterion is a benefit criterion
rij = xj’/xij ; if the jth criterion is a cost criterion
Step 2: Using the weight for the different criteria obtain the weighted score for each alternative using
the normalized decision matrix
Step 3: Based on the final score, rank the alternatives.

SAW Solution
Step 0: Obtain the decision matrix after using a numerical scale for intangible

C1 C2 C3 C4 C5 C6
Project α 32 2 20 5 9 5
xij = Project β 28 3 18 7 5 5
Project γ 30 2 21 3 7 9
Project δ 40 2 20 7 5 5

Decision matrix after using a numerical scale for intangible

Step 1: Obtain the normalized decision matrix using

rij = xij / xj* ; if the jth criterion is a benefit criterion
rij = xj’/xij ; if the jth criterion is a cost criterion

C1 C2 C3 C4 C5 C6
Project α 0.8750 0.9000 0.9524 0.6000 1.0000 0.5556
Project β 1.0000 0.7200 0.8571 0.4286 0.5556 0.5556
rij =
Project γ 0.9333 1.0000 1.0000 1.0000 0.7778 1.0000
Project δ 0.7000 0.8182 0.9524 0.4286 0.5556 0.5556

Normalized decision matrix

Step 2: Using the weight for the different criteria obtain the weighted score for each alternative using
the normalized decision matrix

Weightages matrix (wj) = [0.2, 0.3, 0.1, 0.1, 0.2, 0.1]

C1 C2 C3 C4 C5 C6 S

Project α 0.1750 0.2700 0.0952 0.0600 0.2000 0.0556 0.8558

Project β 0.2000 0.2160 0.0857 0.0429 0.1111 0.0556 0.7112
vij =
Project γ 0.1867 0.3000 0.1000 0.1000 0.1556 0.1000 0.9422
Project δ 0.1400 0.2455 0.0952 0.0429 0.1111 0.0556 0.6902

Weighted Normalized Decision Matrix

= (0. 1400+ 0. 2455+ 0. 0952+ 0.
0429+ 0. 1111+ 0. 0556)

Step 3: Based on the final score, rank the alternatives.

Project α 0.8558

Project β 0.7112

Project γ 0.9422

Project δ 0.6902

SAW ranking  Project γ, Project α, Project δ, Project β