The Future of AI in Manufacturing: What to Know
- Matt Keyes
- Sep 2
- 4 min read
AI in manufacturing is often hyped as a silver bullet, but it’s really more like a Swiss Army knife—most useful when you know which tool to pull out at the right time.
From automating data entry to forecasting demand shifts, AI (and specifically Microsoft Copilot) is making it easier for manufacturers to adapt without burning out their teams.
Think about it: no one in operations wakes up thinking, “I’d love more complexity today!” Ever.
But the mix of custom orders, tighter delivery timelines, and workforce gaps isn’t getting any simpler.
The manufacturers winning right now are the ones using tools that strip away the noise, connect the dots faster, and pull people out of analysis quicksand so they can focus on decisions.
What Are the Biggest AI Trends in Manufacturing for 2025?
Customization isn’t some futuristic perk anymore—in smart manufacturing, it’s as routine as the morning shift change.
Customers expect products tailored to their preferences, and that demand trickles straight down to the shop floor. Add in shorter delivery timelines, ongoing workforce challenges, and the need for real-time insights, and you’ve got a recipe for constant pressure.
To stay ahead, leaders are turning to smart manufacturing trends like connected data platforms, predictive analytics, and flexible workflows. Because the goal isn’t just to collect data, but to act on it in the moment.
A McKinsey report on “manufacturing lighthouses” found that advanced AI use cases in manufacturing industry settings are delivering measurable gains: productivity boosts of up to 30%, defect reductions, and even major energy savings.
These are not future possibilities; they’re happening now in manufacturing companies that are leading the way.
How is Microsoft Copilot Actually Used in Manufacturing Operations?
A question I’ve been hearing more and more from leaders is, “How is AI used in manufacturing day-to-day?”
With Microsoft Copilot for manufacturing, the applications are surprisingly practical:
During production meetings, Copilot can automatically surface KPIs and flag potential bottlenecks.
If a supplier delay threatens to throw schedules off, Copilot suggests alternative scenarios to keep timelines on track.
For frontline workers, it simplifies repetitive tasks like data entry or quality reporting.
Copilot improves forecasting accuracy by analyzing historical patterns alongside live demand signals.
And for managers, it enhances collaboration across departments—no more siloed spreadsheets hiding on personal drives.
These are real-world examples of AI in manufacturing that reduce friction and help teams make faster, better-informed decisions.
Can AI and Tools Like Copilot Help Solve Workforce Shortages in Manufacturing?
Workforce shortages are one of the biggest challenges in the manufacturing industry. And while AI won’t show up in steel-toed boots for a welding shift, it can take plenty off the team’s plate.
Think of it this way: automation handles the copy-and-paste chores, freeing your team to focus on the challenges that deserve their brainpower.
AI also helps upskill existing teams. Guided workflows, contextual prompts, and predictive suggestions act as on-the-job training, helping less experienced staff ramp up quickly.
For younger, tech-savvy recruits, using AI makes the job more appealing by aligning with the tools they already use in everyday life.
So, while AI won’t magically fill every labor gap, its use in manufacturing is a powerful force multiplier for the workforce you already have.
How Do I Start Using AI Tools Like Copilot if My Manufacturing Systems Are Still On-prem?
Here’s the reality: Copilot and most modern AI features are built for cloud-first environments. So if you’re still on-prem, you’re not locked out—you just need a smarter game plan.
Cloud vs. On-Prem Realities:
Easier AI integration in cloud-first environments
Real-time data access vs. delayed/batch updates
Lower IT overhead vs. higher maintenance burden
Scalability without major capital investments
Faster automatic updates vs. manual, costly upgrades
Simpler integrations vs. complex workarounds
Not sure if you’re ready for a full migration?
Consider starting small with hybrid approaches or cloud-connected modules.
Over time, moving your ERP to the cloud opens up the full range of generative AI in manufacturing benefits.
For more on this, see my blog on migrating your on-prem ERP to the cloud for AI insights
Is Microsoft Dynamics 365 Copilot Worth It for Small to Mid-Sized Manufacturers?
For many smaller manufacturers, the question isn’t what is Microsoft Copilot; it’s whether the investment pays off. And the answer comes down to value.
Microsoft Dynamics 365 Copilot delivers:
Faster insights to reduce downtime and costly errors.
Better forecasting, improving inventory, and scheduling.
Enhanced quality control, lowering rework rates.
Built-in scalability - start with one department and expand as you grow.
And because it’s embedded in the Microsoft ecosystem, Copilot in Dynamics 365 integrates seamlessly with tools many businesses already use.
That keeps adoption simple and ensures everyone—not just IT—gets to cash in on the benefits.
Tips for Evaluating and Implementing AI in Manufacturing
If you’re exploring how to use AI in manufacturing, keep these practical steps in mind:
Start with clear goals. Want to reduce downtime, improve forecasting, or enhance quality? Focus on measurable outcomes.
Pilot in one area. Test AI in a single production line or function before scaling across the plant.
Involve cross-functional teams. Operations, IT, and finance all need a seat at the table.
Monitor and adjust. AI is iterative - it improves as you refine data and processes.
Leverage expertise. Partners like Key Partner Solutions can help you align AI tools with your unique business goals.
AI adoption doesn’t have to be a blind leap. It can be more like testing the waters before diving in.
Smart Manufacturing Starts with the Right Tools
The manufacturing industry is growing more complex every year, but that doesn’t mean day-to-day operations have to follow suit.
With tools like Dynamics 365 Copilot, teams can work smarter, simplify decisions, and stay ahead of the curve in a fast-changing landscape.
The takeaway?
If you’re slow to adopt AI in the manufacturing industry, don’t be surprised when your competitors lap you on the shop floor.
Ready to explore what’s possible? Contact Key Partner Solutions for guidance on implementing AI in manufacturing.
About Matt Keyes
Matt Keyes is a visionary leader, founder, and CTO of Key Partner Solutions. With over two decades of experience in Microsoft Dynamics, he is passionate about driving digital transformation for businesses through innovative technology solutions.
His deep technical expertise, combined with a strategic approach to solving business challenges, makes him a sought-after thought leader in the industry.
Today, Matt is focused on empowering companies to unlock new levels of growth and efficiency through cutting-edge software development and consulting.
Connect with Matt on LinkedIn.