Unlike the earlier research works which only focused on fault diagnosis, in this paper a smart fault preventive step is taken in avoiding some category of failures which may be predicted at the initial stage of CNC operation before a fault is diagnosed. Besides this, the domain of fault diagnosis has also been expanded by incorporating human error which was not part of the earlier system. This is the first phase of the study and a comprehensive fault diagnosis expert system algorithm for CNC machine is going to be designed, which can later on be transformed into a knowledge-based intelligent computer applications program. This will be accomplished by consulting experts on various aspects of CNC operations.