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Purpose

This paper aims to provide a cost effective failure mode and effects analysis tool to overcome the disadvantages of the traditional FMEA that the cost due to failure is not defined.

Design/methodology/approach

The method presented in this paper is based on the fuzzy utility theory. It uses utility theory and fuzzy membership functions for the assessment of severity, occurrence, and detection. The utility theory accounts for the nonlinear relationship between the cost due to failure and the ordinal ranking. The application of fuzzy membership functions better represents the team opinions. The Risk Priority Index (RPI) is developed for the prioritization of failure modes.

Findings

The advantages of the FUT‐based FMEA are demonstrated through cases studies. It shows that it can take the cost due to failure into account when prioritizing failure modes.

Originality/value

The FUT‐based FMEA presented in this paper provides a convenient cost‐effective tool for failure analysis. It improves the performance FMEA in the risk and failure analysis for product design and manufacturing/assembly process.

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