^{1}

^{2}

^{3}

Based on the PMBOK risk management frame, this paper collects the potential risk factors of the customized project of company T with Delphi method. After several rounds of research, we get 22 level three factors from the original 6 level one factor. Then we filtrate all the 22 level three factors to identify the TOP10 factors with Analytic Hierarchy Process (AHP). This method is qualitative and quantitative. The project manager can find out the critical factors quickly. It’s very helpful to analyze and solve issues during project management.

As a brand new production mode, customized production aims to produce customized products under acceptable cost and time line. Enormous investment is also required for the new technology and equipments. The internal and external environment changes very quickly as well. The risk happens everywhere, which is believed that a valid risk management is very critical to the success of the project [

This paper uses AHP to calculate the weight of each critical factor and rank them. It’s quantitative and qualitative which can help avoid the subjective decisions. It’s also very easy for the project managers to find out the important factors to help improve the efficiency of the project risk management. The project management knowledge with the AHP can be stored and transferred as well.

In the 1960s, risk management becomes a subject. The purpose of the traditional risk management is to decrease the negative effect to the business operation and sustainable development. The primary strategy is to avoid or transfer the risk [^{th} edition. It will create positive effect or negative effect to the project objective once happened. The target of project risk management is to enhance the percentage and effect of the positive events and lower them on the negative events. The risk management is divided into six processes by PMBOK risk management frame. They are plan the risk management, identify the risk, implement qualitative risk analysis, implement quantitative risk analysis, plan the risk response and control the risk [

AHP (Analytic Hierarchy Process) is suggested by Professor T.L. Saaty from University of Pittsburgh in the early 1970s. It’s an easy and flexible quantitative decision-making method to qualitative questions. It can divide various factors from complicated problems into different levels to make them more systematical [

According to the subjective judgment of the objective reality, the AHP combines the expert advice and analysis judgment effectively. First of all, make quantitative description of the importance between different factors in the same level. Then calculate each factor’s weight of importance. At last, rank the factor based on the weight of importance. The AHP combines the qualitative and quantitative analysis, flexible and systematical to deal with different kinds of problems, which help it get widely attention and application quickly.

Based on the six processes of risk management in the PMBOK, we identify the critical factors of customized production projects with Delphi. In the first round open research, we identify the secondary factor from A1 plan the risk management、A3 implement qualitative risk analysis、A4 implement quantitative risk analysis、A5 plan the risk response and A6 control the risk. We get 11 secondary factors. In the second round evaluation research, we identify the secondary factor from A2 identify the risk and identify the third factor from 11 secondary factors in the meantime. It totally takes 3 rounds. We get 7 secondary factors and 22 third factors from original 6 primary factors. Establish the critical factor evaluation system of customized production project. See

In order to find out the top 10 critical risk factors, this paper analysis all the 22 risk factors with AHP, below is the procedure:

1) Create hierarchy structure model

2) Construct comparison matrix

Primary factors | Secondary Factors | Third Factors |
---|---|---|

A1 Plan the risk Management | C1 Support of Stakeholders | |

B1 Arrange time and resource for the risk management activity | C2 Cost and schedule activities | |

C3 Establish risk contingency reserve using method | ||

B2 An accepted risk estimation basis | C4 Define the risk probability and influence | |

C5 Risk classification | ||

A2 Identify the risk | C6 Risk description format | |

C7 Risk identification method and technology | ||

C8 Risk triggering condition | ||

A3 Implement qualitative risk analysis | C9 Risk attitude of the group and the other stakeholders | |

B3 Create risk rating rules | C10 Risk priority ranking | |

C11 Risk urgency evaluation | ||

A4 Implement quantitative risk analysis | B4 Implement the risk quantified result | C12 Quantification risk priority list |

C13 Probability to fulfill the project objective | ||

C14 Quantitative analysis method | ||

A5 Plan the risk response | C15 Determine the risk response responsible individual | |

B5 Create risk response actions | C16 Negative risk response | |

C17 Positive risk response | ||

CA6 Control the risk | B6 Risk reevaluate | C18 Identify new risk |

C19 Existing risk reevaluate | ||

C20 Cancel outdated risk | ||

B7 The validity of the control process | C21 Comply with the risk management policies and procedures | |

C22 Adjust cost/schedule contingency reserve |

3) Check consistency

4) Calculate the final weight value.

In order to create hierarchy structure model, we need to define the target layer, standard layer and decision layer. The target of this paper is to find out the critical factor of customized production project, so the target layer is effective risk management (A). Because the paper is based on the PMBOK risk management, so the 6 processes (plan the risk management, identify the risk, implement qualitative risk analysis, implement quantitative risk analysis, plan the risk response and control the risk) are the standard layer (B1-B6). At last, we use the 22 risk factors from Delphi as the decision layer (C1-C22). See below

In order to construct comparison matrix for AHP, we need to compare the importance of each factor in the same group. According to the interview information with the industry experts, we get the comparison value. We compare the factor i with the factor j in the same group, and mark them from 1 to 9. 1 means factor i is as important as factor j, 3 means factor i is a little more important than factor j, 5 means factor i is obviously more important than factor j, 7 means factor i is intensely more important than factor j, 9 means factor i is extremely more important than factor j, the other number means the importance is between its

front number and the latter number. The importance of j to i is the reciprocal of the importance of i to j. See

After summarized all the information, we get the below comparison matrix:

Scale aij | Definition |
---|---|

1 | factor i is as important as factor j |

3 | factor i is a little more important than factor j |

5 | factor i is obviously more important than factor j |

7 | factor i is intensely more important than factor j |

9 | factor i is extremely more important than factor j |

2, 4, 6, 8 | the importance is between its front number and the latter number |

reciprocal | When compare j to i,the aji = 1/aij |

C1 | C2 | C3 | C4 | C5 | |
---|---|---|---|---|---|

C1 | 1 | 7 | 5 | 5 | 3 |

C2 | 1/7 | 1 | 1/3 | 1/2 | 1/3 |

C3 | 1/5 | 3 | 1 | 3 | 3 |

C4 | 1/5 | 2 | 1/3 | 1 | 1/3 |

C5 | 1/3 | 3 | 1/3 | 3 | 1 |

C6 | C7 | C8 | |
---|---|---|---|

C6 | 1 | 1/3 | 1/7 |

C7 | 3 | 1 | 1/5 |

C8 | 7 | 5 | 1 |

C9 | C10 | C11 | |
---|---|---|---|

C9 | 1 | 1/5 | 1/3 |

C10 | 5 | 1 | 3 |

C11 | 3 | 1/3 | 1 |

C12 | C13 | C14 | |
---|---|---|---|

C12 | 1 | 3 | 5 |

C13 | 1/3 | 1 | 3 |

C14 | 1/5 | 1/3 | 1 |

C15 | C16 | C17 | |
---|---|---|---|

C15 | 1 | 3 | 5 |

C16 | 1/3 | 1 | 3 |

C17 | 1/5 | 1/3 | 1 |

C18 | C19 | C20 | C21 | C22 | |
---|---|---|---|---|---|

C18 | 1 | 3 | 7 | 1/3 | 5 |

C19 | 1/3 | 1 | 5 | 1/5 | 3 |

C20 | 1/7 | 1/5 | 1 | 1/7 | 1/3 |

C21 | 3 | 5 | 7 | 1 | 5 |

C22 | 1/5 | 1/3 | 3 | 1/5 | 1 |

B1 | B2 | B3 | B4 | B5 | B6 | |
---|---|---|---|---|---|---|

B1 | 1 | 1/3 | 3 | 5 | 1/3 | 1/5 |

B2 | 3 | 1 | 3 | 5 | 1/3 | 1/5 |

B3 | 1/3 | 1/3 | 1 | 3 | 1/5 | 1/7 |

B4 | 1/5 | 1/5 | 1/3 | 1 | 1/7 | 1/9 |

B5 | 3 | 3 | 5 | 7 | 1 | 1/3 |

B6 | 5 | 5 | 7 | 9 | 3 | 1 |

the target layer A.

After we get the comparison matrix, we calculate the relative weight Wi of factor i to the upper layer. The formula for Wi as below:

W i = Q i / Q a , and Q i = ( ∏ j = 1 n C i j ) 1 n , C i j is the importance scale of factor i to factor j.

Q a = / ( i , j = 1 , 2 , ⋅ ⋅ ⋅ n )

This paper use YAAHP to run the AHP calculation.

Effective risk management consistency ratio of the judgment matrix: 0.0028; the weight to the target: 1.0000; λ_{max}: 6.0179 | |||||||
---|---|---|---|---|---|---|---|

effective risk management | Plan the risk management | Identify the risk | Implement qualitative risk analysis | Implement quantitative risk analysis | Plan the risk response | Control the risk | Wi |

Plan the risk management | 1 | 0.6703 | 1.4918 | 2.2255 | 0.6703 | 0.4493 | 0.1367 |

Identify the risk | 1.4918 | 1 | 1.4918 | 2.2255 | 0.6703 | 0.4493 | 0.1562 |

Implement qualitative risk analysis | 0.6703 | 0.6703 | 1 | 1.4918 | 0.4493 | 0.3012 | 0.098 |

Implement quantitative risk analysis | 0.4493 | 0.4493 | 0.6703 | 1 | 0.3012 | 0.2019 | 0.0657 |

Plan the risk response | 1.4918 | 1.4918 | 2.2255 | 3.3201 | 1 | 0.6703 | 0.2181 |

Control the risk | 2.2255 | 2.2255 | 3.3201 | 4.953 | 1.4918 | 1 | 0.3253 |

Plan the risk management consistency ratio of the judgment matrix:0.0126; the weight to the target:0.1367; λ_{max}:5.0563 | ||||||
---|---|---|---|---|---|---|

Plan the risk management | C1 Support of Stakeholders | C2 Cost and schedule activities | C3 Establish risk contingency reserve using method | C4 Define the risk probability and influence | C5 Risk classification | Wi |

C1 Support of Stakeholders | 1 | 3.3201 | 2.2255 | 2.2255 | 1.4918 | 0.3525 |

C2 Cost and schedule activities | 0.3012 | 1 | 0.6703 | 0.8187 | 0.6703 | 0.1197 |

C3 Establish risk contingency reserve using method | 0.4493 | 1.4918 | 1 | 1.4918 | 1.4918 | 0.2014 |

C4 Define the risk probability and influence | 0.4493 | 1.2214 | 0.6703 | 1 | 0.6703 | 0.1405 |

C5 Risk classification | 0.6703 | 1.4918 | 0.6703 | 1.4918 | 1 | 0.1859 |

Identify the risk consistency ratio of the judgment matrix: 0.0000; the weight to the target: 0.1562; λ_{max}: 3.0000 | ||||
---|---|---|---|---|

Identify the risk | C6 Risk description format | C7 Risk identification method and technology | C8 Risk triggering condition | Wi |

C6 Risk description format | 1 | 0.6703 | 0.3012 | 0.1721 |

C7 Risk identification method and technology | 1.4918 | 1 | 0.4493 | 0.2567 |

C8 Risk triggering condition | 3.3201 | 2.2255 | 1 | 0.5713 |

Implement qualitative risk analysis consistency ratio of the judgment matrix:0.0000; the weight to the target:0.0980; λ_{max}:3.0000 | ||||
---|---|---|---|---|

Implement qualitative risk analysis | C9 Risk attitude of the group and the other stakeholders | C10 Risk priority ranking | C11 Risk urgency evaluation | Wi |

C9 Risk attitude of the group and the other stakeholders | 1 | 0.4493 | 0.6703 | 0.212 |

C10 Risk priority ranking | 2.2255 | 1 | 1.4918 | 0.4718 |

C11 Risk urgency evaluation | 1.4918 | 0.6703 | 1 | 0.3162 |

Implement quantitative risk analysis consistency ratio of the judgment matrix: 0.0000; the weight to the target: 0.0657; λ_{max}: 3.0000 | ||||
---|---|---|---|---|

Implement quantitative risk analysis | C12 Quantification risk priority list | C13 Probability to fulfill the project objective | C14 Quantitative analysis method | Wi |

C12 Quantification risk priority list | 1 | 1.4918 | 2.2255 | 0.4718 |

C13 Probability to fulfill the project objective | 0.6703 | 1 | 1.4918 | 0.3162 |

C14 Quantitative analysis method | 0.4493 | 0.6703 | 1 | 0.212 |

Plan the risk response consistency ratio of the judgment matrix: 0.0000; the weight to the target: 0.2181; λ_{max}: 3.0000 | ||||
---|---|---|---|---|

Plan the risk response | C15 Determine the risk response responsible individual | C16 Negative risk response | C17 Positive risk response | Wi |

C15 Determine the risk response responsible individual | 1 | 1.4918 | 2.2255 | 0.4718 |

C16 Negative risk response | 0.6703 | 1 | 1.4918 | 0.3162 |

C17 Positive risk response | 0.4493 | 0.6703 | 1 | 0.212 |

Control the risk consistency ratio of the judgment matrix: 0.0057; the weight to the target: 0.3253; λ_{max}: 5.0256 | ||||||
---|---|---|---|---|---|---|

Control the risk | C18 Identify new risk | C19 Existing risk reevaluate | C20 Cancel outdated risk | C21 Comply with the risk management policies and procedures | C22 Adjust cost/schedule contingency reserve | Wi |

C18 Identify new risk | 1 | 1.4918 | 3.3201 | 0.6703 | 2.2255 | 0.2663 |

C19 Existing risk reevaluate | 0.6703 | 1 | 2.2255 | 0.4493 | 1.4918 | 0.1785 |

C20 Cancel outdated risk | 0.3012 | 0.4493 | 1 | 0.3012 | 0.6703 | 0.0869 |

C21 Comply with the risk management policies and procedures | 1.4918 | 2.2255 | 3.3201 | 1 | 2.2255 | 0.3386 |

C22 Adjust cost/schedule contingency reserve | 0.4493 | 0.6703 | 1.4918 | 0.4493 | 1 | 0.1296 |

After we calculate the weight of each factor, we need to check the consistency of the comparison matrix. Calculate the consistency ratio CR of each matrix. If the CR is less than 0.1, it’s acceptable. Otherwise, we need to rerun the comparison matrix. We can get the CR from the below formula.

C R = C I R I , C I = ( λ max − n ) / ( n − 1 ) ,

The RI can be found from

λ max = ∑ i = 1 n ( A Q ) i n × Q i ,

( A Q ) i is the product of a row matrix and a column matrix. Row matrix is the row i of the comparison matrix, column matrix is the relative weight matrix of the comparison matrix. Qi is from the relative weight calculation in chapter 4.3.

We can get the CR of each comparison matrix from

Multiply the relative weight of each factor by the relative weight of corresponding standard layer. We can get the final weight of all the 22 factors, rank them in descending order, we get the below final weight list of all the factors,

n | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
---|---|---|---|---|---|---|---|---|---|

RI | 0 | 0 | 0.58 | 0.90 | 1.12 | 1.28 | 1.32 | 1.41 | 1.45 |

B1 | B2 | B3 | B4 | B5 | B6 | A | |
---|---|---|---|---|---|---|---|

CR | 0.0126 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0057 | 0.0028 |

factor | weight | ranking |
---|---|---|

C21 Comply with the risk management policies and procedures | 0.1101 | 1 |

C15 Determine the risk response responsible individual | 0.1029 | 2 |

C8 Risk triggering condition | 0.0893 | 3 |

C18 Identify new risk | 0.0866 | 4 |

C16 Negative risk response | 0.069 | 5 |

C19 Existing risk reevaluate | 0.0581 | 6 |

C1 Support of Stakeholders | 0.0482 | 7 |

C10 Risk priority ranking | 0.0462 | 8 |

C17 Positive risk response | 0.0462 | 9 |

C22 Adjust cost/schedule contingency reserve | 0.0422 | 10 |

C7 Risk identification method and technology | 0.0401 | 11 |

C11 Risk urgency evaluation | 0.031 | 12 |

C12 Quantification risk priority list | 0.031 | 13 |

C20 Cancel outdated risk | 0.0283 | 14 |

C3 Establish risk contingency reserve using method | 0.0275 | 15 |

C6 Risk description format | 0.0269 | 16 |

C5 Risk classification | 0.0254 | 17 |

C9 Risk attitude of the group and the other stakeholders | 0.0208 | 18 |

C13 Probability to fulfill the project objective | 0.0208 | 19 |

C4 Define the risk probability and influence | 0.0192 | 20 |

C2 Cost and schedule activities | 0.0164 | 21 |

C14 Quantitative analysis method | 0.0139 | 22 |

With the AHP, we can calculate the weight value of all the 22 factors. Ranking them in descending order, we can get top 10 factors as the risk management critical factors. AHP combines the qualitative and quantitative analysis, the project manager can find out the critical factors quickly. It’s very helpful to analysis and solves problems during project management.

Top 10 critical factors belong to Plan the risk management, Identify the risk, Implement qualitative risk analysis, Plan the risk response and Control the risk. Besides, Plan the risk response and Control the risk are particularly important, they include 7 of 10 critical factors. Project manager can pay extra attention to them.

The weight value of top two factors is obviously bigger. Comply with the risk management policies and procedures as the NO.1 critical factor means it’s very important to ensure the risk management policies and procedures are well executed and complied during the whole risk management cycle. Only in this way we can provide theoretical basis to the other risk management activities. Besides, we should determine the responsible individual for each risk, only when the responsible individual take his own responsibility, follow the risk management policies and procedures, the risk can be well managed.

According to the top 10 critical factors, we can identify the top 10 risks. For example, No.3 critical factor is Risk triggering condition. The corresponding risk is the structure failure. When the product is manufactured, it’s very difficult to tell whether there is a structure issue. But the customers are the professional players. They are much stronger and faster than the amateurs which means the sticks will be broken after several shoots. And broken sticks in the professional level will affect the brand reputation. In order to manage this risk, we should take actions in advance to describe the triggering condition of the structure failure.

As we can see from the final weight list of the factors, the weight of the last five factors are much lower. Which means it will not have too much influence to the whole project. So we don’t need to spend too much resource on them. Just need to review them in a certain period.

In this paper, based on the six processes of risk management, we identify the critical factors of customized production projects with Delphi. We get 7 secondary factors and 22 third factors from original 6 primary factors, and establish the critical factor evaluation system of customized production project. Then we calculate the weight of all the factors from critical factor evaluation system with AHP. After ranking them in descending order, we get top 10 critical factors. They are C21, C15, C8, C18, C16, C19, C1, C10, C17 and C22. With the top 10 critical factors list, project manager can manager each factor specifically, which will improve the efficiency of project management.

Thanks a lot for your valuable guidance, Professor Jiangping Wan.

The authors declare no conflicts of interest regarding the publication of this paper.

Zhong, J.X., Lv, J.T. and Zhang, Y. (2019) Customized Production Project Risk Management with Analytic Hierarchy Process. Open Journal of Social Sciences, 7, 85-95. https://doi.org/10.4236/jss.2019.71008