2025 Smart Manufacturing and Operations Survey: Navigating challenges to implementation

The survey results show that companies embracing the trend are more agile, more attractive to talent, and more productive. The results also reveal key challenges in implementing smart manufacturing systems, such as managing complex transformations and mitigating operational risks. To overcome these hurdles, executives are investing in core technologies and data analytics, allocating significant resources to cybersecurity processes and controls, and focusing on workforce upskilling. Additionally, organizations are forming dedicated internal teams to manage change and drive organizational transformation.

Smart manufacturing and operations transformations are increasing

There is widespread and growing confidence that smart manufacturing and operations will be an indispensable factor in productivity and enterprise growth. Ninety-two percent of manufacturers surveyed said they believe smart manufacturing will be the main driver for competitiveness over the next three years, a six-percentage-point increase from a survey we conducted in 2019. Similarly, 85% of respondents believe their smart manufacturing initiatives will transform how products are made, improve agility, and attract new manufacturing talent.

The interest and investment in smart manufacturing is fueled by what manufacturers see as its primary benefits: Almost half (49%) of respondents reported operational benefits as the primary value sought with smart manufacturing, while 44% noted financial benefits as the second most-sought value.

Smart manufacturing’s value is emerging

Interest and investment in smart manufacturing and operations are encouraged by growing returns. Respondents were asked which business metrics have been impacted by the implementation of smart manufacturing initiatives. In terms of net impact since implementation, respondents saw, on average, a 10% to 20% improvement in production output, a 7% to 20% improvement in employee productivity, and 10% to 15% in unlocked capacity.

Respondents cited improvements derived from smart manufacturing initiatives as encouraging similar investments in supporting functions. While respondents ranked their organizations as most mature in the areas of quality management, operations, continuous improvement, and technology, they reported relatively low maturity in human capital and maintenance. By analyzing the gap between companies’ current and aspirational maturity levels, three functions seem ripe for investment: human capital, material management, and maintenance.

With growing maturity, investment is also on the rise

Looking ahead, manufacturers are targeting human capital for the largest improvement, with aspirations for information technology, data capture, analytics, and application development infrastructure maturity close behind. A striking 78% of respondents allocate more than 20% of their overall improvement budget toward smart manufacturing initiatives. Eighty-eight percent expect investments to continue or increase in the next fiscal year. As expected, the scale of investment roughly tracks with enterprise size, with smaller companies investing modestly and much larger companies investing an order of magnitude more.

How are organizations investing in smart manufacturing?

Adopting, connecting, and optimizing technologies (such as sensors, edge and cloud computing power, cybersecurity, and analytics) clears the way for manufacturers to move farther and faster down the road to smart manufacturing operations. The focus today is on establishing the smart manufacturing technology and data foundations. Manufacturer investments paint a picture of their priorities.

Do investments in automation signal a response to talent shortages?

In terms of priority focus areas for investment within the next two years, almost half (46%) of respondents ranked process automation as the first or second priority. A somewhat smaller proportion (37%) ranked physical automation first or second, while 24% ranked factory synchronization first or second. Investment in automation may be seen as an important element in alleviating skilled labor shortages and maximizing productivity, while factory synchronization may mitigate the impact of labor, asset, and materials constraints.

Forty-eight percent (48%) of respondents said they have moderate to significant challenges in filling production and operations management roles, and 46% reported the same for planning and scheduling roles. The most common human capital concern was not enterprise culture or even health and safety. Instead, more than a third (35%) of respondents cited adapting workers to the “Factory of the Future” as a top concern, including by equipping them with the skills and tools they need to harness the full potential of smart manufacturing and operations. The challenge of addressing the skills gap comes alongside a gap in applications for open positions, as found in the 2024 Deloitte and The Manufacturing Institute Talent Study.

Investments in data readiness and connectivity are setting the stage for increased automation

Reported smart manufacturing technology adoption is focused on sensors, data, physical automation, and AI. In terms of respondents’ first and second priorities for the next 24 months, 41% said they will prioritize investing in factory automation hardware, 34% said they will focus on active sensors, and 28% reported vision systems. The investments enable the capacity to monitor and sense the manufacturing environment, as well as the ability to drive increased automation. Sensing, data capture, and automation are prerequisites for more advanced smart manufacturing value, including thorough analytics, deeper operational insights, and production efficiency. Some of this value is already coming to fruition.

At the facility or network level, 57% of manufacturers are using cloud computing, the same proportion are leveraging data analytics, almost half (46%) are using industrial IoT (IIoT) solutions, and 42% are leveraging 5G. To manage scaled deployments and governance, manufacturers are adopting enterprise standards: Forty-five percent (45%) report leveraging an architecture standard; 54% report a data standard (through a unified data model); and 48% report a training and adoption standard. Adoption of an architectural strategy and standards can help simplify data management and enhance operational agility, as articulated in this Industrial DataOps and Unified Namespace case study.

Respondents are still establishing AI foundations for smart manufacturing and operations

Survey respondents reported moderate adoption of AI for smart manufacturing, although many are still early in exploring AI capabilities. Twenty-nine percent are using AI/machine learning (AI/ML) at the facility or network level, and 24% have deployed generative AI at the same scale. Moderate investments are also being made in experiments and proofs of concept. Twenty-three percent (23%) of respondents are piloting AI/ML, and 38% are piloting generative AI. With gen AI specifically, technology and use cases are still maturing in manufacturing, but across enterprises and industries, experiments, proofs of concept, and scaled deployments are picking up, according to Deloitte’s State of Generative AI in the Enterprise Q4 survey.

That report’s findings track with survey data on smart manufacturing priority investments for the next 24 months. Looking ahead, reported investment priorities remain data focused, with 40% investing in data analytics, 29% in cloud computing, 29% in AI, and 27% in IIoT. By investing in the foundational technology needed to capture, connect, and analyze operational and enterprise data, manufacturers are advancing on the smart manufacturing maturity curve.

Encountering challenges and risks in smart manufacturing transitions

The value of smart manufacturing may be coming into focus, but so too are the challenges that accompany complex transformations. While orchestrating change and accessing the skilled human capital to do so, manufacturers are contending with strategic risk, talent shortfalls, and cybersecurity preparedness.

The potential risk of business disruption in complex transformations

The primary headwinds to successful smart manufacturing programs include leadership buy-in, technology investment, resource constraints, change management and adoption, and value tracking and realization. Secondary headwinds are labor management, collaboration across business functions, and macroeconomic externalities.

Risk management is also a priority. Almost two-thirds (65%) of respondents ranked operational risk as the first or second concern related to smart manufacturing initiatives. The risks include business disruption and losses stemming from failed initiatives. Looking more closely at risks in the operational technology (OT) environment specifically, 55% strongly agreed that unauthorized access was a high concern, 47% cited intellectual property theft, and 46% noted operational disruption. Mitigating strategic risk is near the top of the priority list, with somewhat lower reported attention to compliance and financial risks.

Workforce expansion and upskilling

Manufacturers face a significant talent gap. With as many as 3.8 million net new employees required by 2033 to satisfy labor demands, according to a 2024 Deloitte manufacturing study, smart manufacturing may be part of the solution. The majority (85%) of survey respondents agreed or strongly agreed that smart manufacturing initiatives will attract new talent to the industry as a vibrant and viable career path.

Yet, there remains a need today to equip the existing workforce with the digital skills for smart manufacturing and operations. While nearly half (48%) of respondents reported having a smart manufacturing training and adoption standard in place, human capital was at the lowest maturity level of all smart manufacturing categories surveyed. Perhaps for this reason, human capital is the category in which manufacturers express some of the highest aspirations for improvement.

Cybersecurity and smart manufacturing technology preparedness

The challenge of cybersecurity becomes all the more pressing as enterprises pursue smart manufacturing initiatives to capture and use data for operational and process improvements. Cyber tools are in some cases shared between manufacturing and enterprise environments, and 44% of respondents said their manufacturing cybersecurity solutions are a mix of both dedicated and shared tools. With so much attention to cybersecurity, it tracks that some manufacturers are dedicating, on average, 15.74% of their IT budget.

Despite the allure of cutting-edge technologies, such as AI, virtual programmable logic controllers, and even digital twins, respondents’ average (self-assessed) technology maturity reflects that they are meeting industry standards for technology, data, and automation but not exceeding them. In this, there is still significant room for improvement. As it relates to smart manufacturing maturity, the second largest aspirational change (behind human capital) is in technology readiness, which includes the need to protect technologies and data from cyber adversaries.

How the surveyed executives are transforming people, processes, and technologies

On the road to value and transformation, manufacturers are pursuing winning approaches that accelerate change across the technology ecosystem, the workforce, and enterprise processes.

Core and emerging technology adoption

Many manufacturers are in the process of adopting core technologies like sensors, cloud and edge computing, and AI, as well as emerging technologies such as virtual programmable logic controllers, robotics, and simulations. Yet respondents indicated that the strategic approach today is less about deploying the latest innovation than it is about investing in and adopting core systems to enable smart manufacturing and operations. Survey respondents reported that, in terms of systems prioritized for investment in the next two years, the first or second highest investment priorities are advanced production scheduling (35%), execution systems (33%), and quality management (28%).

Core system investments come alongside solution investments, with 40% of survey respondents ranking data analytics as the first or second highest priority for investment within the next 24 months. Solutions of this kind are necessary, as most of the other smart manufacturing technologies being adopted generate or consume data, such as vision systems, factory automation hardware, and active sensors. With analytics-driven visibility into operations and cyber-physical systems, manufacturers enjoy a foundation upon which to pursue broader transformation.

The volume of data and connected systems create cybersecurity risk, as well as value. Fortunately, survey respondents indicated persistent attention to cybersecurity tactics. Sixty-eight percent (68%) of survey respondents reported performing a cybersecurity risk or maturity assessment of their smart manufacturing technology stack in the last year. In addition, as connected systems create new cybersecurity risks, 91% of respondents surveyed for Deloitte’s 2024 Global Future of Cyber survey, reported one or more cybersecurity breaches in the last year. In this survey, 72% to 74% of respondents cited internal and external penetration testing and vulnerability assessments as a focus in enterprise-wide cybersecurity efforts. Interestingly, when respondents were asked whether their organization enforces or incorporates secure design when implementing new technology solutions, 26% said they do “when it does not delay deployment.” The insight is that productivity is a consistent priority, even in the realm of cybersecurity.

Workforce expansion and upskilling

The most reported method for building digital skill sets and capabilities into the workforce was hiring new talent (68%). There was also a recognition of the need to upskill employees, including leadership. More than half of survey respondents (53%) reported using in-house training for executives, and 43% leveraged training courses developed by vendors or third parties. To supplement capabilities in the near term, 40% of manufacturers reported using contract or contingent labor.

While talent investment and upskilling happened in-house, manufacturers also sought to outsource aspects of their smart manufacturing transformation and operation, particularly in areas where manufacturers are less likely to hold a core competency. Between 69% and 72% of respondents reported moderate to significant challenges in hiring skilled workers for IT, OT, data science and engineering, application development, and cybersecurity—all technology-focused domains. As such, between 65% and 70% of manufacturers are currently outsourcing many roles across technology, data, and cybersecurity, including those focused on implementing OT, IT, cybersecurity, analytics and AI, and automation. In cybersecurity specifically, 69% of respondents said they rely on third parties for cybersecurity detection capabilities (for example, a security operations center), and 73% said they use third-party support for cybersecurity event response.

When considering whether outsourcing is expected to change in the next two years, one trend that emerged is that manufacturers that do not currently outsource many roles will tend to stay on that trajectory and fill roles internally. Conversely, manufacturers that do outsource significantly report they will continue to do so. Both approaches are viable options for satisfying smart manufacturing workforce needs. For manufacturers that elect to fill roles internally to retain dedicated support, they will need to compete across industries for talent and attract applicants where there are gaps. For manufacturers that outsource roles, benefits may include fractionalized resources, task- and time-based employment, and broader domain expertise—potentially at a higher per hour cost but lower cost overall compared to in-house labor.

How are transformational process changes being driven across the enterprise?

Adopting and implementing smart manufacturing technology prompts widespread change to processes and operations. Change cuts across factories, networks, supply chains, and IT/OT environments, and more than half (52%) of survey respondents reported developing a central team or working group tasked with researching, developing, and deploying smart manufacturing initiatives. Other reported change management activities include developing a process to communicate to employees and customers the implications of smart manufacturing (45%), developing a smart manufacturing center of excellence (44%), and developing value targets and a measurement plan for assessing progress against objectives (42%).

Interestingly, despite the significant reliance on third parties for technology implementation and management, only 32.5% reported engaging third parties for support in managing change introduced through smart manufacturing initiatives. Thus, most manufacturers are driving smart manufacturing transformation from within, turning to outside support to supplement activities where talent availability is constrained.

Who ultimately owns the smart manufacturing change initiative? More than half (51%) reported that smart manufacturing initiatives are owned and driven by operations leaders, such as the chief operating officer and director of operations, and 38% reported that technology owners, such as chief technology officer, are leading the charge. The findings align with the workforce challenges many manufacturers are facing and reinforce the need for IT and operations to collaborate. The COO is focused on filling frontline positions where companies require skills for a smart manufacturing environment while the CTO is seeking technical talent to build and maintain the technology ecosystem enabling smart operations.

The smart manufacturing vision is within reach and the journey continues

Back in 2017, the vision for smart manufacturing was only just coming into focus. The potential to connect data and systems for agility was evident, and technology innovation trends suggested the tools to enable smart manufacturing were just over the horizon. It was then merely an aspiration and a vision.

Today, smart manufacturing and operations are among the top priorities for manufacturers across sectors because of the strategic and operational value it is known to create. However, manufacturers must contend with various challenges, such as managing complex transformations, mitigating operational risks, and addressing talent shortages. To tackle these issues, executives are investing in core smart manufacturing systems, data analytics, and cybersecurity measures. They are also emphasizing workforce upskilling and building dedicated internal teams to drive change and transformation. By embracing these strategies, manufacturers can navigate the complexities of smart manufacturing and reap its numerous benefits.