Digital transformation in manufacturing starts with innovation. Rising transportation costs, skills shortages, trade uncertainties, and other key challenges hinder production and logistics operations. By adopting forward-looking digital technologies and making strategic pivots, manufacturers are better equipped to meet customer needs and overcome said challenges.
ABI Research’s The State of Technology in the Manufacturing Industry survey results show that only a handful of manufacturers are digitally mature. The journey to true transformation will be gradual.
Our analyst team studies the biggest manufacturing breakthroughs, ranging from Artificial Intelligence (AI)-driven enhancements to supply chain visibility software. In many cases, the technology solutions are not widely adopted. Indeed, manufacturers often look at early trailblazers before investing in a new solution.
This new era of manufacturing innovation is being defined by the convergence of technology, data, and people. Some of the most influential trends being tracked by ABI Research include:
- AI as a Core Enabler of Manufacturing Transformation
- Data Fabrics for Smarter Manufacturing
- Digital Twins and Threads Driving Production Gains
- Resilient and Intelligent Supply Chains
- Knowledge and People Are the Unsung Heroes Behind Digital Transformation
Key Takeaways:
- AI is transforming production and efficiency. Manufacturers use AI to reduce costs, improve quality, and speed up decision-making. Survey findings show that 72% of firms using AI report reduced costs. For instance, Sony has cut defect rates by 30% with AI-driven inspection tools.
- Data fabrics remove silos and boost insights. Most manufacturing data go unused because they are stuck in separate systems. GE Vernova’s Proficy Data Hub shows how a unified data approach can connect plants and enable operators to leverage the 95% of data that often go wasted.
- Digital twins reduce risk and speed innovation. Virtual models let teams test product prototypes, predict issues, and optimize production before building anything physical. At Rusch Maschinenteile, digital twins reduced downtime by 75% and accelerated production ramp-ups by 40%.
- Smarter supply chains build resilience. AI, tracking tools, and telematics help manufacturers cut fuel costs, prevent theft, improve safety, and respond quickly to disruptions. Platforms like Alphabet’s Chorus provide real-time visibility into goods to reduce losses.
- People and knowledge enforce transformation. Success depends on training workers and capturing expertise from experienced staff. For example, Airbus has a Digital Transformation Office that captures workforce knowledge to support the rollout of Industry 4.0 technologies to manufacturing plants.
Why Innovation Matters to the Manufacturing Industry
Innovation fuels progress in the manufacturing industry. Manufacturers require new ways of designing and producing products that customers will buy. The industrial sector increasingly faces time constraints, labor shortages, and shifting customer demand. Manufacturers that stick with legacy technologies and processes will get swept behind by those that evolve.
Modernizing factories and supply chains is essential to adapting. Emerging technologies such as Generative Artificial Intelligence (Gen AI), data fabric, digital twins, and visibility software are key to accelerating product development, improving quality, and building resilience.
Beyond adopting digital tools, the manufacturing sector must consider the human element. The workforce must be adequately prepared to leverage Industry 4.0 solutions. To meet transformation goals, organizational leadership must conceive novel ways of sharing knowledge and implementing best practices at scale.
Put simply, innovation matters because it turns challenges into opportunities.
AI as a Core Enabler of Manufacturing Transformation
AI-based tools dominate digital transformation conversations. According to a recent survey from the National Association of Manufacturers, 72% of manufacturing respondents report reduced costs and improved efficiency after implementing AI technology.
Gen AI and Agentic AI provide even more innovative capabilities.
Manufacturers apply Gen AI solutions to accelerate production cycles, improve quality, and streamline decision-making. ABI Research survey results tell us that Gen AI is most commonly used by manufacturing firms to identify the root cause of a production issue, create new assembly lines, and provide work instructions.
Agentic AI has seen a lot of hype in 2025. AI Agents can execute entire processes and workflows from start to finish. Agentic tools interact with other agents and systems, and make informed decisions based on memories. AI agents are transforming predictive maintenance, quality control, product development, and resource allocation.
The combination of human expertise and AI’s speed and dynamism enables manufacturers to meet customer demand with precision.
Example
Sony created an edge AI sensing platform called AITRIOS in 2023 to improve quality assurance, employee workflows, equipment health, and safety.
The solution leverages AI models trained on as few as 50 images to visually inspect products and identify imperfections. Sony’s semiconductor and electronics manufacturing plants report a 30% reduction in defect rates.
In addition to quality assurance, the AITRIOS platform is designed to enable predictive maintenance, equipment tracking, and compliance monitoring. This maximizes the long-term value of assets, while ensuring that safety protocols are being followed correctly.
Sony has taken a phased approach with AITRIOS, with the following three stages completed thus far:
- 2023: Platform was launched and introduced at select facilities.
- 2024: Visual inspection and machine monitoring capabilities were added.
- 2025: Predictive maintenance and worker safety use cases are supported.
ABI Research Distinguished Analyst Michael Larner took a closer look at Sony’s AITRIOS platform in his ABI Insight, “Sony’s AITRIOS Platform Offers a Best Practice Guide for Scaling Innovation Across Factories.”
He mentions how the manufacturer has plans to turn AITRIOS into a revenue generator. Larner says, “Sony Semiconductor Solutions showcased AITRIOS at Hannover Messe 2025 and how the platform can be incorporated into other vendor applications, including smart manufacturing solutions from FPT Software, data analytics from Software AG’s IoT platform Cumulocity, industrial Human-Machine Interface (HMI) solutions from Schneider Electric, and AVEVA’s digital twin solutions.”
Sony’s AITRIOS demonstrates that manufacturers themselves can foster ingenuity, rather than solely relying on tech vendors.
Data Fabrics for Smarter Manufacturing
According to ABI Research, manufacturers will more than double their data generation by 2030. Yet just 5% of that data are utilized. Building a core data fabric is essential to harnessing innovative technologies.
Existing data silos limit the potential of AI tools, cause internal fragmentation, carry cybersecurity risks, and delay technology deployment timelines. Some forward-looking vendors use Unified Namespace (UNS) architecture to enable seamless integration with third-party software.
Data fabric delivers a single source of truth across disparate manufacturing domains, making it easier to draw insights.
Example
GE Vernova’s Proficy Data Hub provides the tools that manufacturers need to construct unified data architectures. Data silos are one of the biggest hindrances to building smart factories. The Proficy Data Hub is fully integrated with the technologies that underpin Industry 4.0 operations. This includes analytics, historian, Manufacturing Execution System (MES), scheduling, and Supervisory Control and Data Acquisition (SCADA)/Human-Machine Interface (HMI) solutions.
ABI Research Industry Analyst James Prestwood recently analyzed this innovative manufacturing platform. He posits that, “Proficy Data Hub will not only break down data silos for a singular plant, but for manufacturers’ entire enterprises, connecting plants with a common data model and democratizing data access.”
Prestwood also emphasized the simplicity afforded by a single-pane-of-glass visualization of all operational data. Consequently, manufacturing plants can make faster and more informed decisions based on contextualized, data-backed insights.
Digital Twins for Production Gains
Once a niche concept, digital twins and digital threads are now more widely spread across industrial sectors. According to a news article on Process Excellence Network, Siemens and S&P Global findings show that manufacturers lead in digital twin adoption.
Digital twins—virtual mirrors of real-world assets—enable manufacturers to optimize New Product Introductions (NPIs), extend equipment life span, unlock new business models, and enhance team collaboration.
The ability to construct “what-if” analyses is transformational. It empowers design teams to optimize products and avoid issues before physical production. As a result, manufacturers reduce scrap costs and improve customer satisfaction.
ABI Research recently covered the use of comprehensive digital twins. As the most innovative type of digital twin, comprehensive twins provide a more in-depth overview of products, assets, and processes than other virtual models.
They do this by collating real-time data across all product domains: mechanical, electronics, electrical systems, requirements management, software, low-code capabilities, AI, and the environment around the physical asset. Therefore, the comprehensive digital twin provides complete context around a product, process, and performance.
Example
German workpieces manufacturer Rusch Maschinenteile faced challenges in ramping up production volume and complying with quality assurance requirements. The company partnered with Siemens to introduce a comprehensive digital twin to its operations to match processes and simulate/test new changes in a virtual environment.
This enables Rusch Maschinenteile to iron out any design and production kinks before moving on to the actual production stage. After deploying the digital twin, Rusch Maschinenteile has generated the following gains:
- 40% faster production ramp-up
- 75% reduction in machine downtime
- 80% fewer manual programming tasks
- 20% increase in overall performance
I noted in an Insight of mine that the comprehensive digital twin is “ripe for future innovation in areas that include AI.” In other words, Rusch Maschinenteile is on the right path to maximize value from cutting-edge technology investments.
Resilient and Intelligent Supply Chains
Manufacturers are rethinking their supply chains in light of U.S. tariff policy, global disruptions, macroeconomic volatility, and increased customer demand. Concurrently, enterprises need to account for cargo tracking, driver safety, fuel usage, and vehicle maintenance.
Several innovations are addressing these issues:
- AI tools automate planning and boost resilience. Kearney’s 2025 Reshoring Index indicates strong advocacy among U.S. Chief Executive Officers (CEOs) to reshore manufacturing. These projects are complex and involve numerous stakeholders. AI can simplify the process of finding new supply chain routes and sources. According to ABI Research's 2025 survey results, 64% of supply chain leaders say that having AI/Gen AI capabilities is important or very important when evaluating a new technology solution. AI-based software tools will be instrumental in supply chain planning and real-time scenario modeling. Moreover, intelligent agents build strong supply chain resilience by enabling companies to quickly respond to abrupt changes on the increasingly globalized stage.
- AI tracking reduces theft and cargo loss. Supply chain software is also important for tracking goods in real time. Cargo theft was up 27% in 2024, after already historic increases since 2021. AI-powered tracking tools allow operators to pinpoint the location and condition of cargo throughout the supply chain journey. Without these technologies, manufacturers risk losing millions in stolen, misplaced, and damaged goods.
- Telematics reduces fuel costs and prevents breakdowns. Increased fuel prices and maintenance costs are other logistical concerns. Commercial fleet telematics should be a priority for manufacturing supply chains, as these solutions optimize routes, monitor idling time, and track vehicle diagnostics. With these data, enterprises can minimize the number of stops and address maintenance issues before a truck breaks down.
- Video telematics improves safety and compliance. Finally, manufacturing supply chains must keep their drivers safe and comply with safety regulations. ABI Research has been studying the benefits of AI video telematics. These solutions, such as Verizon Connect, provide transparency into real-time driver behavior. Subsequently, organizations can exonerate themselves from false insurance claims and improve safety coaching efforts. ABI Research Director Adhish Luitel says in a recent whitepaper, "IoT-enabled fleet management solutions can leverage vehicle telemetry to detect and alert drivers and fleet managers with risky driving instances such as speeding, harsh braking/acceleration, or excessive idling on the highway shoulder."
Example
Alphabet, the company that owns Google, is synonymous with “innovation.” Therefore, it comes as little surprise that the tech giant aims to tackle one of the world’s biggest problems: supply chain visibility.
Chorus is a supply chain visibility provider conceptualized under Alphabet’s Moonshot Factory, X. The company offers both hardware and software solutions for supply chains. On the hardware front, Chorus offers three types of sensors:
- Seeker: A small, printable sticker sensor designed for individual item-level tracking.
- Explorer: A compact, key ring-sized device with extended battery life for monitoring larger assets.
- Scout: A versatile unit that functions as both a sensor and reader, enabling location and condition monitoring of goods.
These sensors are complemented by a software platform where supply chain data are centralized. Users are equipped with a dashboard for visualizing stock movements and drawing insights from AI-powered tools. Chorus’ visibility solutions are vital in building supply chain agility, alerting manufacturers to risks like shipment delays, temperature fluctuations, or other issues.
Knowledge and People Are the Unsung Heroes Behind Digital Transformation
Manufacturing innovation goes beyond just adopting new digital tools. Scaling cutting-edge Industry 4.0 technologies across factories and supply chains hinges upon capturing institutional knowledge and empowering the workforce.
- Knowledge Capture: With the baby boomer exodus, manufacturers must retain expertise through workforce planning. Experienced staff members have strong knowledge of equipment, processes, and customers. They understand the impact of issues both downstream and upstream. This tribal knowledge can be passed on to new workers through mentoring and structured training. Digital leaders should already be working with experienced staff members to capture their tips and explore whether they can be incorporated into broader operations. Without this information gathering, manufacturers will be ill-prepared to fully harness the latest innovations.
- Workforce Empowerment: Many plant workers are inexperienced with AI, digital twins, and other technical novelties. In some cases, they probably have never even heard of them. A best practice is to balance top-down direction with bottom-up empowerment. This means devising programs and initiatives as part of the transformation journey. Innovation centers are key to providing guidelines, best practices, and guardrails for new technology deployments. These initiatives empower workers because they provide consistency, strategy, and scalability.
Combined, knowledge capture and workforce empowerment ensure that Industry 4.0 technologies deliver real results instead of gathering dust.
Example
According to ABI Research benchmarking, Airbus is the most digitally transformed aerospace manufacturer worldwide. The company adopts a plethora of technologies, including AI, digital twins, advanced analytics, and Airlines Sciences. To ensure a smooth transition of these technological innovations to manufacturing teams, Airbus has a Digital Transformation Office.
The Digital Transformation Office applies past technology deployment experiences to Airbus’ transformation strategy. Airbus serves as a gold standard for transferring internal knowledge and preparing facility managers for Industry 4.0 adoption.
Making Innovation Part of Everyday Manufacturing Operations
Innovation in manufacturing is not just about adopting Industry 4.0 technologies. It requires fostering an environment where digital transformation principles can be applied uniformly across factories and supply chains.
Manufacturers that balance technology deployment with human expertise today will define the industry leaders tomorrow. That means anticipating how employees will respond, how solutions will scale, and aligning initiatives with specific business outcomes.
Technological advancements continue to yield boons in production and logistics, enabling manufacturers to accelerate output, reduce costs, improve safety, and meet sustainability regulations. Technology progression isn’t going to hit the brakes; rather, it’s becoming part of business as usual across manufacturers of all sizes and industries.
To stay ahead of the competition, manufacturing firms must blend technology adoption with cultural readiness, agile leadership, and empowered teams. This will ensure embedding digital transformation seamlessly into everyday operations.
ABI Research is at the forefront of technology innovation across the manufacturing sector. We can help both technology providers and end users meet their digital transformation goals by offering future-proof best practices, granular market forecasts, competitive intelligence, and marketing deliverables.
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