Manufacturing-X: Shaping the Future of Industrial Transformation?

Now’s the Time to Act

 The EU Data Act lays the foundation for initiatives such as Manufacturing-X or Factory-X, which in turn serve as pillars for the further digital transformation of the economy and industry. Although the path toward a new European data economy is clearly outlined on paper, the question remains how it can be successfully navigated in practice.  Which stakeholders are now particularly responsible for creating federated data spaces that rapidly turn digital value creation, increased resilience, and sustainability for companies and organizations into reality?

Background: The Manufacturing-X initiative was launched as a joint project by industry, academia, and policymakers.  In addition to the federal government, major associations such as VDMA, ZVEI, VDI, and Bitkom, some of Germany’s most innovative manufacturing and IT companies, as well as renowned research institutions like Fraunhofer, are involved.  They all share the goal of advancing the digitalization of the German economy in a serious and impactful way. The aim is to create a unified market that enables free data flow within the EU and across sectors.  Without a common data economy, digitalization projects will only scratch the surface and remain confined to the boundaries of individual factories. Besides enabling the realization of digital business models, the initiative also seeks to enhance the resilience of companies and supply chains and to facilitate the joint implementation of sustainability requirements.

Factory-X is set to play an important role in this context. In contrast to Manufacturing-X, which is being rolled out across industries for the broader industrial sector, Factory-X is specifically aimed at Germany’s core industry mechanical engineering. Its goal is to drive the development of a digital, federated platform designed explicitly for data exchange within the manufacturing sector. It serves as the counterpart to Catena-X in the automotive industry. In addition, similar initiatives are under discussion, such as Aerospace-X for the aviation sector and Silicon-X for the semiconductor industry.

 

Added Value for the Manufacturing Industry

 As part of the X-initiatives, so-called federated or collaborative data spaces are intended to enable the shared and sovereign use of data along entire supply and manufacturing chains. This is to take place according to predefined rules, within the legal framework established by the EU Data Act.

The EU Data Act empowers users of IoT-enabled machines by granting them, for the first time, the right to access and use their own usage data. This data can be freely utilized, monetized, and made available to generate additional digital value-added services within broader ecosystems  — significantly enhancing value creation. At the EU level, the Data Act is expected to unlock an additional €280 billion in value by the end of the decade. Manufacturing-X and related X-initiatives are already being planned on both European and global levels, in line with international value networks, and are attracting considerable international interest. Countries such as South Korea and Japan have already joined the initiatives.

In this sense, the X-initiatives represent a fundamental reorganization of the European data economy and economic order — led by Germany’s Federal Ministry for Economic Affairs and Energy (BMWK), which has allocated substantial public funding to support their development. The overarching goal is to position the EU as one of the world’s leading digital economies and to establish a strong digital leadership role internationally.  Ultimately, the aim is to create an intelligently networked industrial landscape.

 

Ready-to-Use Applications for Strong User Acceptance

 What is now needed in particular are software solution providers, who will play a key role in making initiatives like Manufacturing-X or Factory-X a success.  Broad adoption of federated data spaces will only be possible if a wide range of standardized, ready-to-use Manufacturing-X software solutions is available.

Especially for small and medium-sized enterprises (SMEs), tapping into the full potential of the X-initiatives through custom development projects will prove difficult. But that shouldn’t be their responsibility. Instead, it is up to relevant software providers to design functionalities that are intuitive and easy to use. These providers — including vendors of ERP and MES systems — must equip their customers early on with the technical and functional capabilities needed to access federated data spaces easily and reliably, ideally through ready-to-use solutions.  Without such enablement, the success of these initiatives is at risk.

 

Manufacturing-X Competes with AI, Cloud, and SaaS for Resources

 The challenge: This critical success factor is still largely overlooked by the current key stakeholders in the X-initiatives, including policymakers. In addition, providers of standard software systems have shown only limited involvement so far. Many are either unaware of the initiatives or focused on other priorities, such as artificial intelligence, cloud transformation, or blockchain. So far, only two vendors are actively engaged in Factory-X within the strategically important ERP and MES segment: SAP and Proalpha. Both are working to develop X-compatible solutions for their customers within the next two years. This starting point is concerning. It could significantly delay a broad and early rollout of Manufacturing-X — especially given that the initiative must compete for resources with high-priority technology trends such as AI, cloud, and SaaS-based business models.

It is also important to recognize that Manufacturing-X is primarily a software-driven initiative, with only partial relevance to physical production processes. The main goals — resilience of companies and supply chains, as well as sustainability — are only marginally related to production itself. However, the focus is often misdirected toward manufacturing operations, while the critical role of software providers is overlooked. As a result, many of them do not see themselves as part of the initiative and remain disengaged.

 

Next Steps

 The specific Manufacturing-X offerings will only be developed over the next two and a half years and will then need to be integrated into standardized software solutions. Therefore, it will take some time before these solutions become widely available. In the meantime, both providers and users can begin preparing for federated data spaces and working within ecosystems.

In the conceptual phase of Manufacturing-X and Factory-X, companies should build up capacity and expertise for the upcoming transformation.

 

• Stay informed, network, and take action: Associations such as VDMA, ZVEI, BDI, and Bitkom, along with policymakers led by the Federal Ministry for Economic Affairs and Energy, will actively engage in the X-initiatives in light of the substantial funding available (€250 million for Catena-X and €150 million for Manufacturing-X).  SMEs should seize every opportunity to stay informed and participate in relevant committees.  Additionally, decision-makers from SMEs should discuss the X-initiatives and data spaces with their customers, their customers’ customers, partners, employees, and suppliers: What steps can we take together towards digital ecosystems? Which partners and suppliers are suitable?
  
  
• Develop a digital vision and align the corporate strategy accordingly:  For some companies, this is simply the continuation of their journey; for others, it represents a renewed or first attempt.  They should avoid getting lost in the details of digital transformation and instead approach it purposefully as a business transformation focused on customers, products, markets, and sustainability.
  
  
• Prepare themselves, including their IT systems and data Manufacturing-X: This involves answering the following questions:
  
  • What is the overall level of digitalization throughout the organization, including its employees?
  • Is state-of-the-art technology being used? Are the ERP system and other business applications up-to-date? Does master data management work properly? Have the data been cleaned and could they be integrated into data spaces like Manufacturing-X?
  • What production data are collected? What is being measured and read out? What other information would be interesting and how can it be obtained?
  • Are there already approaches and tools for carbon tracking? What possibilities are there to determine scope-2 and scope-3 emissions? For example, a study conducted by the Research Institute for Rationalization (FIR) at RWTH Aachen on behalf of Proalpha showed that companies can significantly reduce the effort required for carbon tracking by leveraging already available data from ERP, MES, and other business applications [2].

 

 

[1] https://www.proalpha.com/en/

[2] https://www.proalpha.com/de/fir-studie-co2-management-mit-business-software

Author: Michael Finkler, Head of Business Development at Proalpha Group.