Can LLM Agents Efficiently Identify Appliance Faults? Insights From Diagnosing a Simulated Appliance

LLM agents are beginning to invoke industrial asset-management tools through the Model Context Protocol (MCP), yet whether they can act reliably on this substrate for safety-critical Prognostics and Health Management (PHM) is unanswered. Prior benchmarks conflate protocol fluency with reasoning, instrumentation failures with agent failures, and tool use with tool retrieval. We introduce PHMForge, an evaluation environment that closes each conflation. PHMForge ships 99 SME-authored scenarios across eight industrial asset classes spanning rotating equipment, aero-engines, and lithium-ion cells, on public datasets including NASA PCoE, served through 39 MCP-native tools wrapping published PHM algorithms (C-MAPSS, ISO~10816, Arrhenius capacity-fade models, time-series foundation models). Krippendorff's $α\in [0.74,\,0.82]$ on a 30-scenario stratified rotating-equipment/aero-engine sample; the battery extension is single-rater. Across three agentic frameworks and six LLM backbones, the strongest configuration reaches 80.8% pass@1, with the residual gap concentrated in orchestration and tool-sequencing errors. Crucially, an architectural ablation shows that replacing MCP execution with text-based Retrieval-Augmented Generation (RAG) over telemetry-equivalent evidence collapses Remaining Useful Life pass-all-3 from 100% to 20% (5/5 vs.\ 1/5) on the battery class, exposing the structural limits of static retrieval for prognostic computation. Trajectory decomposition shows orchestration errors dominate failures across backbones, while schema-invalid tool calls concentrate in smaller open-weight models. Frontier LLMs are stronger at calling tools than at planning when to call them. PHMForge is open-sourced with deterministic evaluators, a public leaderboard, and a datasheet.

Large language models are increasingly used as integration layers above specialized tools, but a stronger component does not necessarily produce a stronger combined system. Across five diagnostic datasets (bearing vibration, process monitoring, semiconductor equipment), we study whether an LLM can reliably use external diagnostic information; paired repeat calls separate advice effects from output instability. In all five, conflicting external information overturned initially correct LLM judgments. Among the four datasets with direct integration comparisons, none showed a consistent advantage for implicit LLM integration over the stronger standalone source. On a Tennessee Eastman confirmation set whose protocol was fixed before evaluation, unaided accuracy was 64.67%, implicit LLM-specialist integration 77.43%, and the specialist alone 83.33%. Specialist information improved the LLM by 12.8 points (95% interval 9.7 to 15.9), yet the integrated output stayed 5.9 points below the specialist (95% interval -12.0 to -0.7). A two-source selector oracle reached 92.76%, indicating complementarity that the integrated output did not fully realize. The integrated output missed 140 of 295 specialist corrections (47.5%) but lost 15 of 99 initially correct LLM judgments (15.2%). The deficit remained under prompt and specialist sensitivity analyses. Among CWRU cases solved under both evidence presentations, task-aligned physical evidence yielded lower estimates of susceptibility to incorrect advice in six of seven models (five intervals excluding zero); higher reasoning effort gave no reliable reduction in five models, and a separate four-model TEP analysis gave no clear evidence that it resolves the integration problem. Source quality and integration quality should be evaluated separately: an integration layer should be compared with its stronger standalone component, not only with the unaided LLM.

We introduce FailureSensorIQ, a novel Multi-Choice Question-Answering (MCQA) benchmarking system designed to assess the ability of Large Language Models (LLMs) to reason and understand complex, domain-specific scenarios in Industry 4.0. Unlike traditional QA benchmarks, our system focuses on multiple aspects of reasoning through failure modes, sensor data, and the relationships between them across various industrial assets. Through this work, we envision a paradigm shift where modeling decisions are not only data-driven using statistical tools like correlation analysis and significance tests, but also domain-driven by specialized LLMs which can reason about the key contributors and useful patterns that can be captured with feature engineering. We evaluate the Industrial knowledge of over a dozen LLMs-including GPT-4, Llama, and Mistral-on FailureSensorIQ from different lens using Perturbation-Uncertainty-Complexity analysis, Expert Evaluation study, Asset-Specific Knowledge Gap analysis, ReAct agent using external knowledge-bases. Even though closed-source models with strong reasoning capabilities approach expert-level performance, the comprehensive benchmark reveals a significant drop in performance that is fragile to perturbations, distractions, and inherent knowledge gaps in the models. We also provide a real-world case study of how LLMs can drive the modeling decisions on 3 different failure prediction datasets related to various assets. We release: (a) expert-curated MCQA for various industrial assets, (b) FailureSensorIQ benchmark and Hugging Face leaderboard based on MCQA built from non-textual data found in ISO documents, and (c) LLMFeatureSelector, an LLM-based feature selection scikit-learn pipeline. The software is available at https://github.com/IBM/FailureSensorIQ.