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7th IFAC Conference on Manufacturing Modelling, Management,

and Control
International Federation of Automatic Control
June 19-21, 2013. Saint Petersburg, Russia

A Process-Oriented Risk Assessment Methodology for Manufacturing Processes


L.A. Shah, A. Etienne, A. Siadat*
F.B. Vernadat**

* LCFC, Arts et Métiers ParisTech, Centre de Metz, F-57070 Metz France (e-mail: Liaqat.Shah@ensam.eu).
** LGIPM, University of Metz, Ile du Saulcy, F-57070 Metz France (e-mail:
Francois.Vernadat@eca.europa.eu)

Abstract: A process-oriented risk assessment methodology is proposed. Risks involved in a process and the
corresponding risk factors are identified through an objectives-oriented risk identification approach and evaluated
qualitatively in the Process FMEA. The critical risks of the PFMEA are then incorporated in the process model for
further quantitative analysis employing simulation technique. Using the proposed methodology as a decision-making
tool, alternative scenarios are developed and evaluated against the developed risk measures. The risk measures values
issues out of simulation are normalized and aggregated to form a global risk indicator to rank the alternative
processes on the basis of desirability. The methodology is illustrated with a case study issued from parts
manufacturing but is applicable to a wide range of other processes.
Keywords: Risk Assessment, Decision Support, Manufacturing Processes, Process Modeling and Simulation

1. INTRODUCTION but a combination of mutually inclusive risk events may lead


to process/system failure (Shah, 2012). To address this issue,
In the process context, risk stems from uncertainty regarding
one way is to approach the risk assessment problem via
the ability of a process to deliver “the value proposition”–
process simulation, which is now widely used as a decision-
and the consequences thereof. The value proposition refers to
making tool particularly in the process-centric organizations.
the implicit or explicit promise a company makes to its
To approach risk modeling and assessment using process
stakeholders to deliver a particular combination of values
simulation requires an activity-based approach. To this end,
(Martinez, 2003). To make sure the promise would be
some authors have worked on how to integrate risk in process
delivered; process risks should be modeled and assessed to
models for evaluation purpose (Sienou, 2008; Neiger et al.
account for the uncertainties and their consequences on the
2009). Additionally, Larson and Kusiak (1996) developed an
“value proposition”. Risk management is carried out in the
IDEF3-based risk assessment methodology for concurrent
same spirit to safeguard the process value for its stakeholders
engineering projects. Kayis et al. (2007) adopted this
(Sienou et al. 2008). To decide on how much the process risk
methodology to propose risk mitigation strategies in
influences value creation, requires an integrated approach to
concurrent engineering projects.
model and evaluate both the risk and value of the process in
the same environment (Vernadat et al. 2013). However, the The Larson and Kusiak’s risk assessment methodology is,
current study focuses on the risk aspect only. The value can unlike traditional risk assessment techniques, a novel
be evaluated much the same way as risk but with a focus on approach towards risk management because risk assessment
objective modeling instead of risk modeling (Shah, 2012). is activity-based. The methodology is well-suited to the
process-based risk management because it draws on all
To deal with risk, various tools and techniques have been
process modeling concepts and couples it with risk
developed so far. An exhaustive review of these tools and
management discipline and therefore simulable.
techniques can be found in the literature (Tixier et al., 2002;
Nevertheless, the method supposes that all risks and their
ISO/IEC31010:2009). However, commonly practiced
relationship with activities are known in advance. In addition,
techniques in the industrial systems are: failure modes and
the method does not account for risk factors and hence
effects analysis, fault tree analysis and event tree analysis
proposes no selection method for mitigation action.
(Aven, 2008). In addition to these analytical techniques,
Moreover, the method does not propose consolidation of
Monte Carlo simulation provides a statistical approach
measures to facilitate decision-making.
towards risk assessment (Mun, 2006).
In view of the above arguments, this article proposes a
All these tools and techniques have their strengths and
process-oriented risk assessment methodology. The
weaknesses and are aimed at different application domains.
methodology, for the most part, draws on materials regarding
Irrespective of the application domain, often the risk analysis
risk estimation from Larson and Kusiak risk assessment
methods are developed to model and analyze risks from a
approach and extends to integrate risk identification and
subsystem perspective. A system is reduced to subsystems or
evaluation mechanisms in order to be used as a decision-
component parts and then each part is dealt independently.
making tool in the risk assessment of processes.
However, a failure may not happen because of one risk event

978-3-902823-35-9/2013 © IFAC 216 10.3182/20130619-3-RU-3018.00225


2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia

*
"#  $ /#& %#& ' #&
01&
2. RISK MEASUREMENT MODEL
(4)
In the process perspective, uncertainty lies “internal” and &+,
“external” to the activity in the form of risk factors/sources Therefore, the global risk of the process path2 is given by
(Elmaghraby, 2005), which may trigger the occurrence of any Equation 5:
"34  56#789 " # =56#789 5&+, . %#& ' #&
*
undesirable events that ultimately affect the activity progress
towards objective attainment (cf. Figure 1). (5)
And probability : 2 of the path set (or scenario) is such
1*… 1*… 1*… 1*… that:
;
Risk factor Risk event Objective

$ : 2 
Causes Influences
(6)
4+,
So, the expected risk of the processmade of < path sets is:
Figure 1: Risk factors and objectives relationship

; *
Therefore, it is essential to identify and assess the impact of

=>? @   $ : 2 A $ $ . %#& ' #& B


risk events originating from the risk factors on the defined
(7)
parameterized in terms of risk scenario, likelihood and
process objectives. For this purpose, risk, in the first place, is
4+, 6#789 &+,
consequenceas expressed by Equation 1: Equation 7 calculates the expected risk of the whole process.
        3. RISK ASSESSMENT PROCESS
Having defined the mathematical model for risk measurement
Next, it is modeled and assessed in the activity environment.
in process setup, a risk assessment methodology is presented
The underlying assumption for activity-based risk assessment
in this section. The proposed methodology relies on
(
    and thus can trigger one to many risk events,
is that each activity in a process is exposed to risk factors RFi,
modeling, simulation and decision-making approaches and
establishes a risk assessment process consisting of the
which in turn can affect the attainment of process objectives
following four phases:
(as illustrated in Figure 2).
Monitor/ Control 1. Context establishment
Risk Factors 2. Risk modeling and analysis
3. Risk analysis via simulation
Activity Output 4. Risk evaluation
Input
Each phase is detailed in the following subsections.
Objectives
Mechanism 3.1. Context establishment phase

To quantify the process risks  of the same nature, the
Figure 2: Activity exposure to risk factors Context is about defining external and internal parameters to
be considered when managing risk and setting the scope and
likelihood of all risk events multiplied by their corresponding risk criteria for the risk management policy (ISO Guide
consequences (same effect) on an individual activity are first 73:2009). In the framework of the current methodology, the
modeled using Equation 2: context establishment phase identifies application domain,





         (2)
 the stakeholders of the process, their roles and responsibilities
as well as the upper and lower bounds for each stakeholder’s

 Probability of a risk event! on activity

expectations and concerns. Moreover, it delimits the process


under study using modified IDEF3 process modeling method.
    
 
Impact or consequence on quality, cost and time 3.2. Risk modeling and analysis phase
objectives, respectively
The global risk for activity
due to risk event ! is given by To account for risks in processes, the current methodology
Equation 3: proposes a two pronged strategy: objectives-driven risk
*
identification and activity-based approach to risk assessment.
"#  $ %#& '  
()
 
&+,
Objectives-oriented risk identification: The general approach

Where, " # is the risk magnitude of activity-


to risk identification starts with objectives identification
(Moeller, 2007). Relying on this theory, an objective-driven
However, all risk events are not equally important in any approach to risk identification is to find an assertion that
given scenario. Some risks are more important than others obstructs the objectives attainment.

Therefore, a weighting factor or importance index . is


depending on what objective(s) they are influencing.
For instance, if the global objective of a process is to satisfy
customer order, then the corresponding global risk would be:
introduced to model the importance of the risk events in the “failure to satisfy customer order”. Many possible
scenario. So, Equation 3 can be rewritten as: dimensions of the global risk are identified by decomposing
it into lower level risks while employing principles of Value

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2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia

Focused Thinking (VFT), a decision-making methodology Table 1: Activity/risk matrix


developed by Keeney (1992) and adopted to risk
management (Shah, 2012, Neiger et al. 2009). For detail Risks R1 R2 R3 R4 R5 R6
/Activities
review and applications of VFT, the interested reader is
referred to (Parnell et al. 2013). To decompose global A1 × × ×
objective, a simple question: “What do you mean by that” is A2 × ×
sufficient to refine and characterize the upper level risk into
lower level risks while keeping in view the objectives of the A3 × × × ×
process understudy. For example, the question: what do you
mean by failure to satisfy customer order, brings forward Here, each identified risk event is analyzed and RPN is
lower level risks such as technical performance risk, schedule calculated. The objective is to determine whether it is worth
risk and cost overrun, which correspond to quality, time and further analysis or not.
cost objectives of the process. To refine further, schedule risk Table 2: Process FMEA for Schedule Risk
means delay due to order processing, manufacturing and
logistic. The same way, manufacturing delay means lead-time Process Fail. mode Causes Effects P C D RPN
risk due to quality failures, time estimation error and Activity Duration Process Uncertain 5 7 6 210
disruption. Similarly, risks are identified for cost overrun and i estimation - novelty Lead time
technical performance. Once identified, they are structured error - complexity
into hierarchy as shown in Figure 3.
In the same manner, all the identified risk events are analyzed
Failure to satisfy qualitatively in the PFMEA Table. The most critical ones are
customer order then integrated into the process model for quantitative
analysis in the simulation environment as shown in Figure 5.


Spec.
Performance risk Schedule risk Cost overrun Scrap
Raw Ok
Activity i Activity i Inspection X
part
C
Order processing delay Mfg. delay Logistic risk
Rework
Resources
Figure 5: Excerpt from risk-embedded process plan model
Quality failures Disruptions Time estimation error
To analyze risk events of the process model quantitatively,
Figure 3: Risk events hierarchy risk measurement model described in section 2 is employed
Because risk events originate from risk factors, it is necessary in simulation experiment.
to find risk factors which are required in mitigation plans. To
this end, a simple question: “What causes the risk event to 3.3. Risk analysis via simulation phase
occur” brings forward the sources or factors of risk event
Quantitative risk evaluation requires quantitative data
under question. For risk events relevant to manufacturing
regarding risk event parameters which can be obtained from
delay, the possible risk factors are shown in Figure 4.
the historical records employing statistical analysis (Ahmed
Manufacturing delay et al. 2007). However, in the a priori evaluation of processes,
such data does not usually exist. If it exists, it is either not
enough or in the shape to be used. In such circumstances,
Quality failures Time estimation error Disruption simulation is the right tool that can generate sufficient data
regarding risk parameters that the simulation model use later
to estimate risk measures. To carry out simulation
Unskilled Improper Product/ Process Process Resource experiments for this purpose, input data for simulation is
operator machine/tool novelty complexity unavailability generated.

Figure 4: Risk events and corresponding risk factors Input data generation: The input data required for risk
analysis in the simulation environment can be divided into
Process-based risk analysis: The identified risks are then three categories: functional data (activities), parameters to
linked via risk/activity matrix to the activities whose make the conceptual process model executable and risk
objectives are influenced by the identified risks (cf. Table 1). evaluation methods. The former data is obtained in the
For instance, R5 represents the risk event “time estimation context establishment phase by process modeling of the
error” and is related to A1 and A3 due to their uncertain scenario using IDEF3 method. For the parameters, it is
execution times. Similarly, all identified risks are linked to advisable to divide them into several categories such as run
responsible activities of the process scenario. In the next step, parameters (job arrival law, arrival type: batch or single
they are analyzed qualitatively using Process FMEA entity arrival, warm-up period and so on) process plan
technique as shown in Table 2. parameters (i.e. operation times) and objectives related
parameters (i.e. order quantity) as described in (Shah et al.,
2012; Shah, 2012). Concerning the evaluation methods (see

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2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia

Table 3), they are mathematical expressions for measures and attractiveness such as {null, very weak, weak, moderate,
are required to analyze the scenario. strong, very strong, extreme}.

develop risk expressions N by solving inter criteria


Table 3: Evaluation Methods In the current study, the MACBETH procedure is used to

Risk Measures Calculation Method commensurability issue and to map them on a OP Q scale. As
I
MACBETH relies on the weighted mean to aggregate risk
 2  $   D EF G H
Cost overrun expressions, which is often not the case in real-life examples
+, where criteria may interact, the Choquet integral has been
I
chosen as the operator for the aggregation of risk expressions.
 2  $   D .J. H
Schedule Risk It can handle interdependencies among different risk
+, expressions through Choquet capacity.

I
Choquet Integral: To aggregate the risk expressionsN , the
 2  $  K L M G 
Quality Risk following 2-additive CI mathematical model is used:
+, X X

R S  $ T# U# V $ Y#& ZU# V U& Z
W
Simulation experimentations and output data collection: (8)
#+, #+,
Having defined the input data, the risk-embedded process
Where [ models vectors of risk expressions N ,  denotes a
model (conceptual model) is transformed into simulation
Shapely index with 5I+,   that represents importance of
model. The simulation parameters and evaluation method are
risk expression N relative to all other risks expressions and
fed into the simulation model. In the probabilistic setup, the
\ , interaction between risk expressions (N  N , ranging in [-
simulation model generates random data for each parameter

1,1]. To calculate the unknown CI parameters ( & \ ), two


and estimates risk measures of interest (cf. Table 3). They
are then fed into the risk evaluation phase to pass on
judgment on each risk measure w.r.t the defined risk criteria. fictive situation are considered besides alternative processes
and are ranked pairwise and individually (Clivillé et al.,
3.4. Risks evaluation and aggregation via multi-criteria 2007; Shah, 2012). A preference ranking of these situations
decision-making phase along with the strength of preference will give a system of
equations whose solution determines the CI parameters.
Risk evaluation means estimating significance or judging the
acceptability of the risk. The significance or judgment of a In such preference modeling, the alternatives satisfy one or

The situations where only one N = 1 and all others are equal
risk can only be established when compared against its target two risk expressions simultaneously (Clivillé et al., 2007).
value, upper and lower bounds. In addition, risk measures
to zero, the aggregated value is as follows:
I
out of simulation experiment are heterogeneous in nature and
"]^   V $+, \
W
most often large in numbers. Therefore, it is desirable to
consider multiple criteria decision-making technique(s) (9)
_

The aggregated value of the situations where one N = 0 and


which, on one hand, develops a normalized value function
(also called utility function) for each risk measure while
all other equals to 1 will be as follows:
I
comparing each risk measure against its UB and LB and, on

"]^  V  V $ \
the other hand, set the stage for aggregation of the normalized
W +,_ 
risk measures (henceforth, risk expressions) to facilitate (10)
decision-making process.
4. APPLICATION
In the multi-criteria model of the current methodology, risk
measures are normalized using the MACBETH method. The methodology is illustrated on a case study about a
Determination of interaction among risk measures is carried manufacturing company that designs and fabricates product
out using Choquet capacity while aggregation is performed on make-to-order (MTO) basis.
using the 2-additive Choquet integral (2-additive CI). Loaded workpiece
clamped
MACBETH: MACBETH (Measuring Attractiveness by a Axle
Categorical Based Evaluation TecHnique) is a multi-criteria
decision analysis approach used to determine value functions Cap

as well as aggregated ones while comparing different Bolt

scenarios (Bane e Costa and Vansnick, 1999). The risk


functions (henceforth risk expressions) set reflects decision- Body
makers’ (DMs) preferences or judgments of risk criteria with
reference to fictive situations. Two situations are compared
pairwise for a risk criteria and thus ordinal information is Spring
obtained, which is then transformed into cardinal information
through “difference of attractiveness”, which is quite natural
to decision-makers who usually rely on verbal levels of Figure 6: Mechanical Locator

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2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia

The reference product for this case study is a mechanical Table 4: Excerpt of PFMEA for quality risks
locator (Figure 6), a work holding device used for centering
of job on a machine-tool. To illustrate the use of the proposed Proces Reqs. Failure Causes Effects P C D RPN
methodology within the company, a manufacturing scenario -s mode
is defined.
Op 02 ` cone not
 Axle Improper Unable
4.1. Case study: Manufacturing Scenario assembly to hold
5 7 6 210
  locate tolerance the WP
The company under study receives an order for 200 high
 the WP allocation rightly
quality mechanical locators from a customer with a lead time
High RPN risks are integrated into the process plan model for
of two weeks (10 working days). The price of the product is
further analysis in the simulation environment. To calculate
kept at $14 /per unit. So, the most critical objective in the
the probability of a risk event, it is sufficient to observe and
scenario is technical performance of the product, measured in
record at a critical activity (whose risk is of concern) in the
terms of satisfaction index (q) (Anselmetti, 2008).
simulation model; the number of times the activity objective
The company has sufficient resources at its disposal, is not achieved divided by the total number of observations

function   H is calculated. For example, in case of


therefore parts: axle, body and cap are machined at the made. For determining the impact of a risk event, an impact

delay, the formula:    )a is employed where a and b are


facility while springs and bolts are purchased from the

the coefficients and H is the dependent variable indicating


market. We assume that all raw materials and the purchased
parts are available whenever needed.
the range which exceeds the due date. Similarly, the cost
Failing to satisfy the customer order will cause penalty cost.
(i.e. per unit cost overrun H has an impactH b ). For the quality
impact function is calculated assuming a quadratic function
A product having satisfaction index below 0.8 are rejected. In
case of delay after the tolerance period (2 days), the company
failure impact, the severity scale of the FMEA is used.
has to pay $2/unit time tardiness up to 5 working days for
each product, beyond this period the order is cancelled and For quantitative analysis of the risk events, the risk-
backlog cost of $10 per unit is paid. In addition, upper bound embedded process plan models are transformed into
cost is set to $18. executable simulation models. They are then simulated using
the discrete event simulation software: Rockwell ARENA
Having described the manufacturing scenario, the proposed
v.13.5. Ten independent replications for each process plan
risk assessment methodology is then applied to determine the
were run. In each replication run, process plan and scenario
level of risk involved in the scenario.
related parameters were loaded into the simulation model and
4.2. Application of the methodology to the mfg. scenario risk measures estimates are obtained as presented in Table 5.
Table 5: Simulation Results for mfg. process plans
To assess risks involved in the manufacturing scenario, the

overrunb risk c )


company generates manufacturing process plans for the Schedule Cost Performance
reference product. For this purpose, the methodology risk (, )

P Wd e ef g hi


described in Sormaz and Khoshnevis (2003) have been
adopted. To develop alternative process plans, the product is Mfg. process plan 1

P f  W ji j W
decomposed into geometrical features. To manufacture each
feature, process candidates are selected using inquiries to the Mfg. process plan 2
appropriate knowledge base of the manufacturing processes. Mfg. process plan 3 g i P j e g hj
Once the process plans are generated, they are then modelled
using IDEF3 modeling method. To obtain the risk expressions, first, two fictive situations
To identify risk events and the corresponding risk factors, representing upper and lower bounds for each measure are
objectives-oriented risk identification approach is used. A defined. Next, process plans and the two fictive situations are

preferences  
 i as follow:
global risk: “failure to satisfy customer order” for the ranked in the desirability order along with strength of

, k l. D,  Db W Dm g D, nJNo


scenario is fixed and decomposed into schedule risk, cost
overrun and performance risk. Since critical objective for the
customer order fulfillment is the technical performance of the b  k l. D, g Dp W Dm  D, nJNo
c  k l. Dc g D,  Db W D, nJNo
product, therefore, this facet of the risk is further decomposed
into more refined facets. In the second step, risk factors for
each identified risk are determined. The identified risks and The preference modeling information is next transformed into
risk factors are then structured into risk hierarchy and risk risk expressions using MACBETH procedure. The resulting
network respectively similar to Figure 3 & 4. risk expressions are then populated in Table 6.

To determine risk parameters for the risk events, they are first Risk expressions N as well as the CI parameters ( & \ )
contextualized using activity/risk matrix. Once linked, they identified via Equations (9) & (10)are put in Equation (8)
are then analyzed in the process FMEA Table (cf. Table 4) and global risk for each process plan is calculated (Table 7).

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2013 IFAC MIM
June 19-21, 2013. Saint Petersburg, Russia

Table 6: Risk expressions (normalized risk measures) Elmaghraby, S. E. (2005). On the fallacy of averages in
project risk management. European Journal of
Schedule Cost overrun Performance Operational Research, 165(2), 307-313.
risk risk Grabisch, M., Labreuche, C. (2009). A decade of application
P W P hd P ii
of the Choquet and Sugeno integrals in multi-criteria
Mfg. process plan 1
decision aid. Annals of Op. Research, 175 (1), 247–286.
Mfg. process plan 2 P gd P ef P fd ISO Guide 31000:2009, Risk management: Guidelines on

P dd P j P ei
principles and implementation of risk management (ISO,
Mfg. process plan 3 Geneva, Switzerland).
ISO/IEC Guide 73:2002 Risk Management - Vocabulary -
Table 7: global risk indicator for mfg. process plans Guidelines for use in standards (ISO, Geneva,

Global \ &  for risk measures


Switzerland).
Kayis, B., Arndt, G., Zhou, M., Amornsawadwatana. (2007).
\ 
Risk A Risk mitigation methodology for new product and

q rs \,b  P Ph ,  P gj
process design in concurrent engineering projects. CIRP
Mfg. process plan 1 Annals - Manufacturing Technology, 56 (1), 167–170.

q rt \,c  P g b  P d
Keeney, R. (1996). Value-focused thinking: A path to
Mfg. process plan 2 creative decisionmaking. Harvard University Press.

q ru \bc  P Ph c  P jd
Larson, N., Kusiak, A. (1996). Managing design processes: A
Mfg. process plan 3 risk assessment approach. IEEE Transactions on
From Table 7, it can be concluded that manufacturing process Systems, Man, and Cybernetics- Part A: Systems and
plan 1 involves the least risk (P eg) followed by process plan Humans, 26, 749–759.
Martinez, V. (2003). Understanding value creation: the value
P eh Furthermore, the technical performance being the
3 (P ei) and process plan 2 with a maximum risk score of
matrix and the value cube. University of Strathclyde,
critical risk in the scenario carries more weight with a Glasgow, Ph.D. Thesis.
Shapley index of (P jd followed by schedule risk (P gj) and Moeller, R. (2007). COSO Enterprise Risk Management:
cost overrun (P d). understanding the new integrated ERM framework, 1st
ed. Wiley& Sons, New-York.
5. CONCLUSIONS AND FUTURE WORK Mun, J., 2006. Modeling Risk: Applying Monte Carlo
Simulation, Real Options Analysis, Forecasting, and
In this paper, a process-oriented risk assessment methodology
Optimization Techniques. Wiley & Sons, New-York.
for manufacturing processes is presented. The methodology
Neiger, D., Rotaru, K., Churilov, L. (2009). Supply chain risk
establishes a risk assessment process to develop a global risk
identification with value-focused process engineering.
indicator that can be used a decision-making tool.
Journal of Operations Management 27(2), 154–168.
The methodology will be extended to model the causality Shah, L.A. (2012). Value-Risk based evaluation of industrial
relationship between risk factors and risk events via Bayesian systems. Arts et Métiers ParisTech, PhD Thesis.
network. In addition, cost effective risk mitigation strategy Shah, L., Etienne, A., Siadat, A., & Vernadat, F. (2012).
will be incorporated. A risk acceptability zone vis-à-vis value (Value, Risk)-Based Performance Evaluation of
will also be defined to make the proposed performance Manufacturing Processes. In Information Control
framework more robust for decision-making. Problems in Manufacturing, 14 (1), 1586-1591.
Sienou, A., Lamine, E., Pingaud, H. (2008). A method for
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