The digital factory and connected data are the future of manufacturing

For manufacturers, creating a digital factory makes sense: faster speed to market, more agile processes, increased customization—and more.

Detlev Reicheneder

July 5, 2022

min read
The digital factory and connected data are the future of manufacturing (video: 3:00)

Industry 4.0 has taken manufacturing to the next level, handing processes over to technology, smart machines, and artificial intelligence (AI). These transformations often happen in isolation, creating siloed environments that miss the bigger purpose of digitalization. But when a company connects data among people, programs, and processes, the sum creates a digital factory.

A digital factory represents far more than the physical process of making things: It’s a concept in which the factory itself figures into the equation. The goal of a digital factory is to optimize manufacturing processes and the environment that houses them.

Despite the acceleration of digital transformation, the World Economic Forum found that 62% (PDF, p. 10) of manufacturing companies have digitized only one product line, which means they’ve gained a fraction of the data that’s possible with Industry 4.0.

A man holds tablet in front of industrial robots on an assembly line
A digital factory gives the owner insights into how to design, build, and manage the facility—as well as its assets—throughout the entire lifecycle.

To take the first steps toward a digital factory, companies should:

Powered by data connectivity, a digital factory enables cross-functional coordination, creates greater agility to adapt to the changing world, and gives companies a competitive edge. It’s the apex of digital transformation for the manufacturing industry.

What is a digital factory?

A digital factory is a shared virtual model of key factory characteristics—such as geometry, behavior, and performance—that displays the convergence of all digital networks in the facility and its operation. This digital representation compiles data from the structure, systems, assets, and processes. This gives the owner insights into how to design, build, and manage the facility; how to reconfigure it; and how to maximize the efficiency and productivity of every asset. This silo-free ecosystem enables real-time collaboration, smarter decision making, and better outcomes.

Some characteristics of a digital factory include:

A digital factory applies the same principles used to optimize the product-development lifecycle—thought leadership, systems, theories, and methods—to the lifecycle of the factory itself. It also allows companies to simulate what-if scenarios to identify opportunities to upgrade the functions of the manufacturing environment.

Common goals and reasons for creating a digital factory include:

  • Making better products

  • Attracting more customers

  • Improving operational efficiency and sustainability

  • Increasing innovation

  • Speeding up time to market

  • Gaining actionable insights

Digital factories are intuitive ecosystems powered by data and enhanced by human ingenuity. They can adapt to volatility and are resilient in the face of disruption.

The 5 phases of creating a digital factory

A woman in a ponytail sits at a desk with a laptop and an external monitor showing the same rendering.
Using simulation, owners can plan the movements of people, machines, and materials to find the most efficient workflow and space allocation for all of the components within the factory.

Whether you’re building a new operation or reconfiguring an existing one, it’s important to follow a phased approach to creating a digital factory: plan, design, validate, build, and operate.

1. Plan

Planning a digital factory begins with logistics and laying out the operation. Start by breaking down workflows step-by-step to determine each station location, equipment placement, and a configuration that maximizes productivity. If digital transformation is underway, a company will already have an extensive library of items that can go into the factory.

During planning, simulating the movements of people, machines, and materials can help determine the most efficient space allocation to eliminate bottlenecks for a faster time to market. Designers will also integrate suppliers and vendors into the digital coordination of the factory.

2. Design

After the planning phase, you’ll have a sense of the manufacturing framework as you begin to design the digital factory. Engineers determine how to lay the plan out in the physical space. Any stakeholders in the factory will get involved now, pulling from the same plan to design their specific area. This might include an ergonomics team that evaluates workstations or the HVAC team mapping the movement of air throughout the facility.

These factories are massive buildings with large machinery and many moving parts. Digital design allows installation issues to be seen early, which means fewer errors during the build and operation phases, and gets them up and running quicker.

A rendering of the inside of a factory
During the design phase, engineers and other stakeholders can detect any clashes early on before the physical factory is built.

3. Validate

All stakeholders review the design to ensure its viability and validate that the layout will work. Virtual reality can bring the factory to life, helping stakeholders visualize the space and make revisions if needed. During this phase, you’re aligning the design with the intent of the operation. This helps uncover clash detections and sort out any problems in advance, ensuring you’re working toward the best outcomes.

4. Build

Next up: construct the digital factory. This is a digitally orchestrated process, using technology such as building information modeling (BIM) to coordinate between multiple teams—such as architects, engineers, and contractors—and reduce the risk of cost and schedule overruns. A construction cloud platform creates a common data environment and a single source of truth for every stakeholder to work from.

With a detailed construction sequence, you can organize and streamline the build process. BIM tools coordinate logistics while visualizations simulate the layout to test and retest the movement throughout the space and workflows. When everything is installed in the factory, you connect all the stations together and power it up. Then, you ramp up production until you hit the output you need. The digital factory begins to generate a feedback loop with actionable insights.

A woman in safety glasses holds a tablet on a factory floor.
Once the factory is up and running, the digital representation collects data and provides an overview of the entire operation, allowing owners to continually optimize the factory for its entire lifecycle.

5. Operate

Your digital factory is up and running, pulsing with data that flows freely among people, programs, and processes. You have a digital twin that sits on top of the physical asset, tying all the information together and allowing different programs and networks to communicate. This virtual representation gives you an overview of your entire operation and helps you see the impact of every decision. Empowered with this information, you can continually optimize a facility for its entire lifecycle, even adjusting specific production runs. For example, if you discover you need 10% more product for a customer’s order, but you calculated only a 5% overage, you can refer to your virtual model to reorganize the production line and adjust the output.

Operation is responsible for approximately 80%–90% of a building’s cost. A digital factory is designed to reduce those costs by delivering deep insights. For example, machine learning and automation facilitate predictive maintenance, alerting workers to an issue before a piece of equipment malfunctions. This saves the company from unexpected downtime, which costs manufacturers $50 billion a year, and keeps production moving without disruption.

5 benefits of a digital factory

Three people in safety glasses look at a machine in a factory.
Using the data insights from a digital factory, manufacturers can meet consumers’ demand for customized products.

Facing a global pandemic, disrupted supply chains, and extreme fluctuations in demand, the manufacturing world is under pressure to be more agile and adaptable. Companies that can’t pivot quickly will lose out. Digital transformation gives companies the tools to collect enterprise-wide data that can get a manufacturing operation unstuck and create growth opportunities.

In a recent survey of 200 industrial German companies, PricewaterhouseCoopers found that while 91% (PDF, p. 1) of them are investing in digital factories, only 6% have achieved full connectivity. Although any progress in digital transformation is helpful, there are specific benefits that come from having the connected data of a digital factory.

1. Faster time to market

In manufacturing, companies are often focused on the product lifecycle—but there’s a factory lifecycle, too. To maximize productivity, the environment where the manufacturing happens must be optimized. And that’s the whole purpose of digitalization. Thanks to automation and a connected ecosystem, information moves faster in a digital factory than in traditional manufacturing. Manufacturers can leverage insights for a faster design and engineering process, iterate solutions, and make rapid decisions. The World Economic Forum (PDF, p. 13) found that the most digitally advanced manufacturing companies (a consortium it calls the Global Lighthouse Network) increase their speed to market by as much as 89%.

2. Flexible manufacturing for greater agility

As the COVID-19 pandemic has proven, stability is never guaranteed. Supply chains ruptured and have yet to fully recover. But with a digital factory, companies are more agile, able to react to whatever is happening in the economy and the world.

Digital factories enable flexible manufacturing. With smart machines, companies are more resourceful and can quickly find alternative solutions to change course, make modifications, or adapt to new scenarios. If manufacturers can’t get a part due to supply-chain problems, they can make it in-house or connect with another manufacturer. With this flexible model, companies can create solutions that lead to new revenue streams, more innovation, and limited disruptions.

3. Customization for changing demands

Earlier this year, manufacturing experienced a surge in demand, reaching a 37-year high in activity. In fact, manufacturing is on track to surpass pre-pandemic (PDF, p. 2) production levels. But it’s not just demand that’s evolving; what consumers want is changing, too. Mass customization is rapidly becoming a must-have capability for manufacturers. Consumers will pay more for products they can put their personal stamp on.

With a digital factory, manufacturers can meet this growing demand for customized products using small-batch runs or adding features to an existing offering. One customer might order 1 million standard pens while another might want 1,000 pens made out of titanium. A third customer might want 10,000 green pens. With a digital factory, manufacturers can easily customize each order by making different design and manufacturing choices. Being able to accommodate customer needs gives your company a competitive advantage.

4. Achieving sustainability and business goals

Manufacturing might create the goods consumers want and need, but there are environmental costs to creating those products. Manufacturing generates 20% of global emissions and is responsible for 54% of the world’s energy consumption.

With a data-driven operation, companies have the insights that can help them work toward sustainability goals defined by industry standards, by the state or federal government, or by the manufacturer itself. Some companies are even adding a sustainability role in their C-suites dedicated to tracking these metrics, spearheading green policies, and ensuring the company stays in compliance. A digital factory facilitates more sustainable operations through technology:

  • Digital twins generate real-time actionable insights so owners can make more sustainable choices.

  • Generative design allows engineers to find environmentally friendly options (like raw materials) in the design and build of their digital factory and surrounding infrastructure.

  • Automated systems and AI track energy usage data (like heat) based on human behavior within a space.

For companies with net-zero goals, a digital factory is the way forward.

5. Boost operational efficiency

Seven common areas of waste are often associated with manufacturing:

  • Transportation

  • Inventory

  • Motion

  • Waiting

  • Overproduction

  • Overprocessing

  • Defects

Digital factories support lean operations by eliminating redundant behaviors, consolidating workflows, and automating processes. This all contributes to lower costs and increases time employees can spend on value-adding work.

The ultimate vision of a digital factory has everything and everyone integrated—shop floor, building, infrastructure, suppliers, vendors, and stakeholders—creating a connected data flow. This allows you to automate, predict, and create a certain intelligence that maximizes efficiency across the entire operation. With a digital factory, owners can simulate alternatives to find more efficient ways of achieving goals, like Porsche did when it replaced the traditional conveyor belt for a free-wheeling autonomous vehicle that customizes production, eliminating unnecessary steps by going only to the stations it needs for each car.

Examples of a digital factory

An Porsche Taycan being built on the line in Stuttgart, Germany
A view inside Porsche’s new factory in Stuttgart, Germany, where a driverless transport system acts as a modernized assembly line. Image courtesy of Porsche AG.

The core tenet of the Toyota Production System (TPS) is continual improvement of an operation to add value, eliminate waste, and improve productivity and efficiency. It was a concept Toyota created early in the 20th century that continues to this day. The company applies TPS to its factories by improving worker skill sets and leveraging technology. Digital factories operate from the same philosophical foundation. Here are two companies that are realizing the benefits of connected data and the digital factory.

Brioche Pasquier

Brioche Pasquier has followed an enviable trajectory from small family bakery to international food manufacturer of French delights, such as its signature brioche rolls. To ensure the consistency of its products as the company scaled and decentralized production, Brioche Pasquier digitized its factories (PDF) to coordinate operations across the business’s 18 international production sites.

Connected through the cloud, European facilities can inform the design of new factories. Information from each location is integrated into 3D digital representations with Autodesk Navisworks and shared across the company so other engineers can use these digital models as a reference. This digital-factory approach ensures consistency and connects everyone, from the physical manufacturing operation to the business side of the company.


Porsche has a long history of innovation. The company rolled out its first commercially available high-performance sports car, the 356, on June 8, 1948. The company has come a long way since those first 52 cars were hand-built in an Austrian garage. Fast-forward to the present day. In one of Porsche’s newest factories, a driverless transport system (called Flex-Line) is a modernized assembly line in which autonomous vehicles move cars from station to station, enabling customization to each order.

The company created an integrated planning model to digitally lay out every detail of the carbon-neutral factory and then iterated the design to meet the desired specifications, such as the weight-bearing loads of the floor (615 pounds per square foot). Suppliers could also access the model to configure their equipment to Porsche’s space, ensuring collision-free production lines. Today, the Stuttgart, Germany, factory is in full swing, with the virtual model guiding operational improvement. The result? A digital factory that’s greener, smarter, and leaner—what the company calls Porsche Production 4.0.

What is the future of the digital factory?

Manufacturing scene with two men and a large white industrial robot
Connected data can help make machines more intelligent, giving them the ability to detect issues and course-correct without human intervention.

Although 85% of companies accelerated digital transformation during the pandemic, digital factories are not the norm quite yet. But what would a future with a digital-factory landscape look like? Here’s a quick glimpse.

Intelligent manufacturing

Right now, the concept of a digital factory is built around technology, machines, tools, and robots. But it all comes down to what these machines contribute: data. The future of digital factories is converging data from multiple sources and asking, “What does this combined data reveal?” Connected data leads to more than smart manufacturing: It will create intelligent manufacturing. A smart factory gives you the information to take specific action for optimizing your factory and achieving a certain quality. With intelligent manufacturing, the factory will use data to make decisions, too—like machines that can sense when something’s not right and course-correct independently.

Platforms power integrated factory modeling

Where will all this data live? On platforms in the cloud, where this live-action view enables 360-degree visibility of an operation. Besides simply breaking down silos, platforms will also become more powerful, extending beyond the walls of the digital factory to support integrated factory modeling (IFM).

A man is checking parts/inventory in a large warehouse-type building.
Companies using digital-factory technologies are inherently more agile and able to quickly pivot to avoid economic or supply-chain issues.

IFM includes more than just the building and what’s inside. It includes the surrounding environment—such as infrastructure, parking lots, water management, warehouses, and office buildings—connecting everything inside and out. With this integrated factory model, manufacturers can also connect suppliers, vendors, contractors, and stakeholders in a common data environment. This means they can all work off the same data, at the same time, creating the ultimate vehicle for collaboration. German electric automobile manufacturer e.Go used IFM to help create its smart factories. Having a single digital platform keeps all contractors and collaborators on track.

Distributed manufacturing landscape

According to the National Association of Manufacturers (NAM), siloed data (PDF, p. 8) is still a top reason companies experience supply-chain issues. Only 21% of small manufacturers have confidence in the visibility of their supply-chain network. Digital factories remedy this by allowing these smaller enterprises to work together. In the future, digital factories will facilitate cooperative networks so companies can share equipment, pool resources, and strengthen resilience for individual companies and the industry.

A man and a woman in construction jackets and white hard hats discuss plans on a tablet and two monitors.
With a digital factory, manufacturers can help close the skilled-labor gap by attracting tech-hungry talent eager to use the latest and greatest technology.

Distributed manufacturing decentralizes materials and fabrication and empowers smaller companies to reap the rewards of digital connectivity. Globally, 98% of manufacturing companies are small- to medium-size enterprises (SMEs.) But when it comes to digitalization, SMEs often lack the capital to invest in Industry 4.0 at the speed and scale of larger competitors. With distributed manufacturing, these businesses can come together virtually, acting as one large organization with the same strength as a massive factory enterprise.

A skilled labor force

Digital factories will change manufacturing processes—and the nature of manufacturing jobs. And that’s a good thing. Right now:

  • There are 570,000 manufacturing jobs that need to be filled.

  • A full 77% of manufacturers have difficulty filling jobs and finding skilled workers.

  • At the current rate, 2.1 million manufacturing jobs will go unfilled by 2030, costing the industry $1 trillion.

Why is this happening? Workers reaching retirement age outnumber those entering the industry. In fact, manufacturing ranks second to last of seven industries when it comes to job appeal. The next generations want to work for digitally progressive employers, an area where manufacturing has traditionally lagged behind.

Digital factories are a prime opportunity to rebrand the industry and close this gap. Manufacturers can leverage the newest technology to attract tech-hungry talent: And what’s more exciting than a factory filled with robots, AI, and smart machines?

With a digital factory, owners have access to the exact information they need, when they need it. They can use that data in smarter ways to inform business decisions, identify and respond to challenges before they happen, and be more resilient in an unpredictable world.

Detlev Reicheneder

About Detlev Reicheneder

Detlev Reicheneder is senior director, business strategy design and manufacturing at Autodesk. Based in Germany, Reicheneder has been with Autodesk for 19 years and has 28 years of industry experience. He’s responsible for the worldwide design and manufacturing industry strategy, market development, and industry thought leadership. Reicheneder graduated from Technical University Dresden with a degree in micromechanics engineering and electronics technology.

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