Smart Manufacturing is Picking Up Speed

Digital transformation in manufacturing is no longer a slow, experimental process; it is moving at full throttle. In 2024, U.S. manufacturing reached a historic high, with real output hitting $2.913 trillion. Employment was also strong, with 12.76 million workers in manufacturing roles by December. But these numbers tell only part of the story. Beneath the surface, leaders are increasingly aware that maintaining momentum will require more than traditional production models.

The momentum toward smart manufacturing, where advanced digital technologies like AI, IoT, cloud computing, and data analytics are integrated into every stage of production, isn’t being driven by curiosity alone. It is being pushed by the need to solve deeply rooted problems in efficiency, quality, and workforce availability. The post-pandemic shift in supply chains, coupled with rising global competition, has accelerated urgency. The question is no longer “Should we digitize?” but “How quickly can we do it without falling behind?”

The Labor Shortage is Here to Stay

Labor shortages are not a temporary hiccup; they are a long-term reality that will shape manufacturing strategy for years. According to 2024 research from the Manufacturing Institute and Deloitte, the U.S. will need 3.8 million net new manufacturing employees by 2033. The challenge is stark: as many as half of those positions could go unfilled if current trends continue.

This is despite manufacturing offering some of the best compensation in the industrial world. In 2024, average manufacturing wages exceeded $102,000 when benefits were included, yet companies still struggled to fill positions. Retirements, a lack of younger workers entering the trades, and the rapid evolution of skill requirements all contribute to the gap.

By 2033, this talent shortfall could cost the U.S. economy $1 trillion annually in lost output if not addressed. The situation is already pressing. Nearly 60 percent of manufacturers in a Q3 2024 survey said attracting and retaining employees was their single greatest challenge, outranking supply chain concerns, raw material costs, and even market volatility.

AI and Automation Step In

Faced with this talent shortage, manufacturers are turning to technology not simply to improve efficiency but to fill the gaps that people cannot. In 2025, Rockwell Automation reported that 81 percent of manufacturers said both internal and external pressures were driving them to accelerate their digital transformation efforts. These pressures range from workforce shortages to cost control and sustainability goals.

The most notable area of investment is artificial intelligence. Ninety-five percent of manufacturers surveyed have already invested in AI and machine learning or plan to do so within the next five years. This shift is not about replacing workers entirely but about enabling a smaller workforce to achieve more. AI is being applied in predictive maintenance, automated quality inspection, supply chain optimization, and even dynamic energy management tasks that allow human workers to focus on higher-value problem-solving.

Importantly, 48 percent of manufacturers expect to repurpose or hire workers as part of their smart manufacturing initiatives. Forty-one percent are already using AI and automation directly to address skills gaps and labor shortages. This approach blends human expertise with machine intelligence, ensuring technology enhances rather than replaces human roles.

Cybersecurity is Now Mission Critical

As factories grow smarter, they also grow more connected, and that connectivity brings new risks. In 2025, cybersecurity ranked as the second-largest external concern for manufacturers, up significantly from previous years. Nearly half, 49 percent, of manufacturers plan to use AI in their cybersecurity strategies, up from 40 percent in 2024.

Why the sharp rise? Digital manufacturing systems are increasingly tied to enterprise networks, suppliers, and even customers in real time. A single breach could halt production, compromise proprietary designs, or disrupt entire supply chains. AI-driven cybersecurity tools offer faster detection of anomalies, automated threat responses, and continuous learning to stay ahead of evolving attack methods.

For manufacturers, this shift means cybersecurity budgets are no longer optional or reactive; they are a core pillar of operational resilience. The integration of cybersecurity into every stage of digital transformation is becoming as essential as the production equipment itself.

Workforce Readiness is the Weak Link

Even with high-tech tools, manufacturing transformation depends on people. In 2025, Deloitte found that 85 percent of manufacturers believe smart manufacturing will help attract new talent, especially by modernizing the image of the industry. The idea of working with advanced robotics, AI systems, and high-precision digital equipment has more appeal to younger generations than traditional factory roles.

However, there is a catch: only 48 percent of manufacturers have a standardized training and adoption program for smart manufacturing technologies. This lack of preparedness could slow adoption and limit the benefits of new investments. Without clear pathways to reskill existing employees, technology adoption risks creating an even wider skills gap.

Forward-thinking manufacturers are beginning to address this by partnering with technical colleges, offering in-house upskilling programs, and creating cross-training opportunities that allow workers to adapt to new technologies over time.

Outdated Tech Hurts Hiring

While some factories are racing ahead with digital transformation, others are falling behind, and it is costing them in recruitment. In 2025, 72 percent of U.S. manufacturers reported that outdated technology was making it harder to attract talent. For younger workers, the idea of stepping into a facility with decade-old systems is far less appealing than joining one equipped with modern tools and smart systems.

This is especially relevant as reshoring continues to bring more manufacturing back to the United States. In this competitive hiring environment, a company’s technology stack has become a differentiator. Seventy-four percent of manufacturers reported acute shortages of skilled workers in 2025, and 94 percent expect to hire or repurpose workers as part of smart-manufacturing adoption efforts. Those without modernized systems risk being left behind in the talent race.

The Factory of the Future is Emerging

Despite the urgency, the fully realized smart factory is still rare. In 2025, only about 7 percent of manufacturers described their operations as extensively digitized, and just 5 percent considered their facilities to be “very smart.” However, progress is accelerating 15 percent expect to reach end-to-end digitization by 2026, and more than half say their factories are “getting smarter” year over year.

This transition is not only about installing new equipment. It involves integrating advanced analytics, AI, connected machinery, and cloud platforms into a seamless operational model. It also requires a cultural shift embracing continuous improvement, data-driven decision-making, and collaboration between human workers and intelligent systems.

Manufacturers that succeed in this transformation will not only be more efficient and resilient, but they will also be better positioned to attract the next generation of talent, weather market volatility, and lead in innovation.