How can component manufacturers use software to unlock automation?

As smart factories evolve, the need for a connected digital thread — from raw material inventory to finished goods and shipping — has never been more critical. A seamless digital thread, powered by digital twins, not only ensures process reliability, but also provides flexibility and creates the feedback loops needed for continuous optimization.

While a few manufacturers are advancing rapidly on this journey, automation maturity is still uneven. Many automate parts of their shop floors, while other steps remain largely manual. The drive toward higher automation is fueled by two main forces:

• Increasing component complexity: Advanced manufacturing demands more intricate, precise, and adaptable production processes.
• Shortage of skilled labor: Manufacturers are seeking software solutions that not only automate tasks but also simplify operations and reduce the dependence on highly specialized skills.

This shift also demands more flexible and accessible support. Manufacturers increasingly expect instant access to technical expertise — available 24/7 — to resolve urgent problems and keep operations running smoothly.

Software as an enabler to increase automation

In our second whitepaper recently launched, we addressed questions such as:

• What criteria do component manufacturers use when selecting manufacturing software?
• How valuable are integrations in streamlining the production process?
• What are the preferences for accessing and paying for manufacturing engineering software?
• How can manufacturing processes be simplified through software?

The importance of integrations

As automation expands, integrating disparate systems becomes essential. Our study found that:

• CAD-to-CAM integration: seamlessly linking design to manufacturing processes is viewed as vital, ensuring that design data flows effortlessly into production planning.
• CAM-to-Simulation/Verification integration: integrations that enable simulation, verification, and optimization help manufacturers fine-tune processes before physical production, reducing errors and waste.
• CAM-to-Tool Management integration: accurate tool data and physics-based cutter path strategies are crucial for efficient machining.

A mill programmer from a US-based general manufacturer noted: “We do not have any integrations in place. The different providers of solutions are keeping things separate. CAD and CAM integration is definitely the most important one.”

In practice, 65% of component manufacturers prefer integrated workflows that deliver these capabilities through seamless experiences. Smaller companies typically want a single point of contact and easy deployment, while larger companies value the flexibility of best-of-breed tools combined through customized integrations.

A useful analogy: many of our customers still use their manufacturing software much like people used Office applications in the past — constantly importing and exporting data between disconnected systems. The future lies in seamless, connected experiences — just as Office 365 now enables fluid collaboration and data flow across applications. Manufacturing software must evolve in the same direction.

Delivery and hosting preferences

I come from another background where Cloud and subscription-based (SaaS) has been a dominating trend. In manufacturing, there is more hesitation the closer you come to the machine, for several reasons. A customer can use ERP or CRM in Cloud as a SaaS service but not their manufacturing engineering software. That is on-premises and acquired by perpetual.

This is validated in our whitepaper as well. When it comes to how manufacturing software is deployed, our survey shows a cautious approach:

• Perpetual licensing vs. SaaS: Although 45% of respondents are open to SaaS models, 55% still prefer the traditional perpetual license model.
• Hosting environments: Many manufacturers (41%) prefer on-premise hosting due to stringent security and privacy requirements, particularly in regulated industries like defense, while others lean toward hybrid or private cloud solutions. Only 11% favor public cloud hosting.

As one engineering manager from a US-based machined parts manufacturer explained: “We store everything on a local server. It is not the preferred way to do it, but I believe anyone working within the defense industry operates that way. We cannot really use cloud-based servers due to privacy concerns.”

At Sandvik, we believe in giving our customers the freedom to choose how they run and manage their solutions, without being locked in. That’s why we design our technologies to be flexible and cloud-friendly. So whether a customer uses a public, government-protected cloud or their own secure cloud environment, they can still take full advantage of modern, scalable solutions that fit their needs. If a customer has a government protect cloud, or their own secure cloud we should still allow them to benefit from modern technologies.

The rising role of Artificial Intelligence

AI is rapidly reshaping the manufacturing landscape. In our study, several AI use cases emerged as critical:

• Feature recognition and CAD/CAM guidance: AI-driven feature recognition helps manufacturers respond faster to quotations, while guidance in CAD design and CAM programming reduces costs and shortens time-to-market.
• Inspection detection: AI systems can detect anomalies in real time, enhancing first-time-right production and reducing scrap, but it can also generate inspection sheet, and instructions for the e.g. CMM machine.
• Advanced AI assistants: Tools such as our recently launched Manufacturing Copilot for CAM software aim to simplify production processes, enhance customer support, and lower the learning curve for end users. These innovations are not only boosting productivity but are also poised to redefine employee roles as routine tasks become increasingly automated.

The integration of AI into manufacturing software is expected to be a game changer, infusing a generational shift reminiscent of the evolution seen with solutions like GitHub Copilot – that increase software developer productivity. As AI capabilities mature, and in particular AI Agents starts to take form with clear business value then we will see a new wave of innovation for that unleash creativity for humans that still are in the loop.

Turning vision into value

Based on our study:

• Integrations and robust digital threads are fundamental for achieving a seamless, self-optimizing production flow.
• Bundled software solutions are preferred when they clearly demonstrate ease of use, superior integrations, and they increase business case.
• AI adoption is set to stepwise transform key manufacturing processes, reducing the learning curve, lowering costs and enhancing productivity.
• Flexible deployment options (freedom of choice, adaptive cloud) will help manufacturers balance security with innovation.

While the ultimate goal of a fully automated, continuously self-improving production system may vary by company size and type, one thing is certain: smart manufacturing software, infused by AI, is a critical enabler in navigating the journey from Industry 4.0 to a future that some are beginning to call Industry 5.0 – and where humans are still in the loop and sustainable manufacturing emerge.

At Sandvik, we are committed to driving this transformation. By partnering with industry leaders like EY and collaborating with technology innovators such as Microsoft, we are helping component manufacturers unlock the full potential of automation, today and into the future.

For further insights, please explore our whitepapers and our AI initiatives in manufacturing:

• Whitepaper 1: 6 levels of automation in component manufacturing
• Whitepaper 2: Trends in manufacturing software usage
• Manufacturing Copilot

Feel free to join the conversation, what automation level is your organization aiming to achieve next?