Manufacturing executives are wagering nearly half their modernisation budgets on AI, betting these systems will boost profit within two years.
This aggressive capital allocation marks a definitive pivot. AI is now seen as the primary engine for financial performance. According to the Future-Ready Manufacturing Study 2025 by Tata Consultancy Services (TCS) and AWS, 88 percent of manufacturers anticipate AI will capture at least five percent of operating margin. One in four expect returns exceeding 10 percent.
The money is there. The ambition is there. The plumbing, unfortunately, is not.
A disparity exists between financial forecasts and the reality of the factory floor. While spending on intelligent systems accelerates, the underlying data infrastructure remains brittle, and risk management strategies still rely on expensive manual buffers.
The pressure to extract cash value from tech stacks has never been higher. 75 percent of respondents expect AI to rank as a top-three contributor to operating margins by 2026. Consequently, organisations are funneling 51 percent of their transformation spending toward AI and autonomous systems over the next two years.
This spending eclipses other vital areas. Allocations for AI outpace workforce reskilling (19%) and cloud infrastructure modernisation (16%) by a wide margin. For CIOs, this imbalance signals a looming crisis: attempting to deploy advanced algorithms on shaky legacy foundations.
Anupam Singhal, President of Manufacturing at TCS, said: “Manufacturing is an industry defined by precision, reliability, and the relentless pursuit of performance. Today, that strength of foundation becomes multifold with AI in orchestrating decisions—delivering transformational business outcomes through greater predictability, stability, and control.
“At TCS, we see this as a defining opportunity to help manufacturers build resilient, adaptive, and future-ready enterprise ecosystems that can thrive in an era of intelligent autonomy.”
Analogue hedges in a digital era
Despite the heavy investment in predictive capabilities, operational behaviour betrays a lack of trust. When disruption hits, manufacturers aren’t leaning on the agility of their digital systems; they are reverting to physical safeguards.
Following recent disruptions, 61 percent of organisations increased their safety stock. Half opted for multisourcing logistics. Only 26 percent utilised scenario planning via digital twins to navigate volatility.
This is the disconnect. While AI promises dynamic inventory optimisation, a benefit cited by 49 percent of respondents, the prevailing instinct is to hoard inventory. Supply chain leaders are buying Ferraris but driving them like tractors. Bridging this gap requires moving from reactive safety measures to proactive and system-led responses.
Ozgur Tohumcu, General Manager of Automotive and Manufacturing at AWS, commented: “Manufacturers today are facing unprecedented pressure—from tight margins to volatile…
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