Decision making for risk evaluation: integration of prospect theory with failure modes and effects analysis (FMEA)

Abstract

The aim of the present study is to overcome some of the limitations of the FMEA method by presenting a theoretical base for considering risk evaluation into its assessment methodology and proposing an approach for its implementation. Fuzzy AHP is used to calculate the weights of the likelihood of occurrence (O), severity (S) and difficulty of detection (D). Additionally, the Prospect Theory-based TODIM method was integrated with fuzzy logic. Thus, fuzzy TODIM was employed to calculate the ranking of potential failure modes according to their RPNs. In order to verify the results of the study, in-depth interviews were conducted with the participation of industry experts. The results are very much in line with Prospect Theory. Therefore, practitioners may apply the proposed method to FMEA. The most crucial failure mode for a firm’s attention is furnace failure followed by generator failure, crane failure, tank failure, kettle failure, dryer failure, and operator failure, respectively. The originality of this paper consists in integrating Prospect Theory with the FMEA method in order to overcome the limitations naturally inherent in the calculation of the FMEA’s Risk Priority Numbers (RPNs).