Mid-market manufacturers expect high ROI on AI investments, but data and infrastructure hurdles remain critical barriers to success. How can firms turn ambition into action?
Artificial intelligence (AI) is revolutionizing manufacturing, offering significant opportunities for firms to enhance efficiency, cut costs, and boost revenues. According to Avanade’s AI Value Report 2025, mid-market manufacturers—known for agility and innovation—are poised to lead this transformation. Despite limited budgets compared to industry giants, these firms exhibit bold ambitions to use AI as a lever for growth.
However, the path to success isn’t without challenges. Companies must address foundational issues—such as data quality, infrastructure compatibility, and workforce readiness—to fully realize AI’s potential. The Avanade report explores insights from 4,100 decision-makers across 10 countries and 9 industries, including manufacturing, about their AI aspirations for 2025.
AI is benefitting every stage of the manufacturing value chain. According to Avanade’s new research, 62% of firms plan to focus on AI for supply chain management, while 48% prioritize factory IT/OT troubleshooting. These areas exemplify how AI can streamline operations and boost competitiveness.
AI enhances supply chain management by predicting demand, evaluating suppliers, predicting potential disruptions, and suggesting optimal procurement strategies. AI-driven insights, drawing on near real-time data, help manufacturers maximize inventory availability and reduce waste while maintaining optimal production levels.
Factories are deploying AI for automated quality control using machine vision to reduce waste, delivering cost and environmental benefits. In addition, AI-enabled troubleshooting helps identify machine faults, resolve them quickly, and even prevent future breakdowns, minimizing downtime and operational expenditure.
Despite the excitement, 74% of manufacturers report poor data quality and governance as significant barriers to AI adoption. Another 49% cite software compatibility issues. A persistent challenge for manufacturers adopting AI is the divide between IT (Information Technology) and OT (Operational Technology) systems.
Historically, these systems were developed and operated independently. IT focuses on enterprise-level data—like inventory, financials, and customer information—and OT manages factory-floor processes, including machinery, sensors, and production lines. For example, predictive maintenance relies on real-time data from OT systems, but without integration with IT systems, it cannot account for inventory availability or production schedules to prioritize interventions.
Unstructured IT/OT data is a goldmine for manufacturers. Estimates suggest that 80–90% of manufacturing data is unstructured, making it a significant yet underutilized resource to enhance decision-making and business performance. This includes:
AI models work best when trained on proprietary company data. Unlike generic datasets, proprietary data reflects the unique characteristics of a manufacturer’s operations, products, suppliers, logistic partners, and customer relationships. With proprietary data, AI becomes a strategic partner, not just a tool, helping manufacturers create unique efficiencies, improve customer satisfaction, and explore innovative revenue streams like service-based models.
To help firms unlock AI’s potential, Avanade’s Gemba Walk program offers tailored assessments for identifying high-value AI applications. Gemba means “the real place” in Japanese and is part of the “lean” manufacturing methodology to uncover opportunities for continuous improvement. By engaging directly with frontline workers and management teams, this hands-on approach bridges the gap between AI’s theoretical possibilities and tangible business outcomes.
AI has the power to redefine manufacturing, but success requires more than ambition. By addressing foundational issues—data integration, governance, and workforce readiness—mid-market manufacturers can position themselves as leaders in the AI-driven industrial revolution.
Avanade’s AI Value Report 2025 highlights both the opportunities and challenges on this journey, emphasizing the importance of practical, incremental steps to ensure long-term success.
For firms ready to take the next step, Avanade’s expert-led programs provide the roadmap to make AI a practical and profitable reality.
Visit www.avanade.com/manufacturingcopilot to learn more.
Tune in to hear from Chris Brown, Vice President of Sales at CADDi, a leading manufacturing solution provider. We delve into Chris’ role of expanding the reach of CADDi Drawer which uses advanced AI to centralize and analyze essential production data to help manufacturers improve efficiency and quality.