Production in the age of AI, circular economy and autonomous systems

In the debate around the supply chain of the future, one aspect is taking center stage: production as the core of modern value creation for many companies. In times of global change, digital disruption, and growing demands for sustainability, it has a key role to play.

The production of the future is networked, flexible, and data driven. Leveraging technologies such as robotics, artificial intelligence, and the Internet of Things, it is increasingly growing together with other areas of the supply chain. This development is giving rise to a digital ecosystem in which real-time data availability enables faster and more accurate decision-making across the entire supply chain.

At the same time, production is gaining strategic importance: Companies are relocating manufacturing processes closer to sales markets to reduce their dependency on global disruptions – a trend that has been further amplified by the pandemic, energy crisis, and geopolitical tensions. In addition, there is increasing regulatory pressure and simultaneous efforts to produce more sustainably and to use resources more efficiently. All of this must be achieved while maintaining the lowest possible production costs.

In short, production is not merely one element of the supply chain, but the driving force behind its future. It determines how resilient, climate-friendly, and innovative businesses can operate tomorrow. The fourth part of the study by SAP Business Consulting and Kühne Logistics University on “Supply Chain 2035” therefore focuses on production.

The result of the study clearly highlights that the vision of a connected, AI-powered, and sustainable factory has long since arrived in the minds of many manufacturing managers – yet its implementation is still at the beginning in many places. There is a noticeable gap in maturity between the ambitions for 2035 and today's reality. While many organizations have already formulated a clear vision for the future, operational execution often remains fragmented and experimental.

The gap in sustainability and the circular economy is particularly striking. Circular production models and closed-loop material cycles are seen as key pillars of future value creation but are currently only implemented sporadically. Product designs that facilitate recycling, reuse, and modular construction are often still in the early stages of development.

Achieving digital continuity represents another major challenge. While connected, data-driven control is considered a prerequisite for the smart factory; data landscapes are often fragmented. The lack of interoperability and inconsistent standards makes it difficult to leverage production and supply chain information end-to-end.

Similarly, the deployment of artificial intelligence falls short of expectations. Many companies are experimenting with AI-powered applications, but the leap from pilot projects to widespread deployment is still pending. In addition, data quality and availability remain critical bottlenecks. Without clean, consistent, and connected data, every digital initiative remains piecemeal. It is only on this basis that intelligent systems can be scaled, and factories can be managed holistically.

In addition, organizational structures are undergoing transformation. Many companies are moving from experimentation to scaling – a process that requires not only new technologies, but also new skills, structures, and leadership approaches. Transforming production therefore entails not just digitalization but a fundamental shift in the interaction between people, machines, and data.

The study underscores that while the path towards the factory of the future is charted, many pillars are still under construction. Success will depend on consistently linking technological and organizational building blocks. The factory of the future will not emerge from isolated innovations, but from the integrated interplay of data, technologies, and resource-efficient processes.

The factory of 2035 will differ fundamentally from what we are used to today. It is no longer a production system of siloed processes, but part of an intelligent, globally connected value-creating ecosystem. Data forms its central raw material – flowing through all systems in real time, connecting design, manufacturing, logistics, and recycling to a dynamic and adaptive cycle. The decisions are increasingly taken by artificial intelligence. It controls material flows, optimizes production plans, and detects deviations and disruptions early and preventively. Human expertise will thus shift toward strategic, creative, and monitoring tasks – AI becomes the central instance of production.

The physical factory itself becomes autonomous and modular. Production lines adapt in real time to changing orders, materials, or energy availability. Mobile robots, self-learning systems, and digital platforms orchestrate processes largely independently.

At the same time, the paradigm shifts from linear to circular production. Closed loops are emerging; products are designed in a modular manner and optimized for reuse or remanufacturing. Digital twins and IoT data connect the physical and digital worlds. Each manufacturing step, component, and usage generates data that makes the life cycle of a product fully traceable. This digital memory not only enables precise traceability, but also predictive maintenance, accurate material returns, and the continuous improvement of future product designs.

In summary: Industrial transformation is more than technological modernization – it is a cultural change. The factory of 2035 becomes a reality where data intelligence and circular thinking become part of the company’s DNA – not as an isolated project, but as a foundational principle. Those who actively shape this change not only strengthen their efficiency, but also their ability to reinvent themselves in an increasingly interconnected and dynamic industry.

This article was written in collaboration with Prof. Kai Hoberg (Kühne Logistics University) in the context of the SAP-KLU study "The Supply Chain of the Future”.