Factory-X: How SAP Is Driving the Digitalization of Mechanical Engineering
With the Catena-X collaborative data ecosystem, the automotive industry has successfully demonstrated how sovereign data exchange works. Factory-X now transfers these proven principles to mechanical engineering—from the supply chain to the shop floor.
Europe faces a crucial challenge: while the region has been successful for decades with the principle of “quality over cost,” other continents are catching up in quality while also pursuing aggressive pricing strategies. “We must maintain quality while simultaneously reducing costs and becoming even more flexible in meeting our customers’ needs,” explains Georg Kube, head of Industry Data Ecosystems at SAP SE.
The answer may lie in the data that has been collected in German factories and SAP systems for decades. “Europe’s great asset compared to America and Asia is our historical knowledge of how good processes and good products work,” Kube says. “This systemic knowledge—how to machine, how to manufacture, how to set up the right processes—resides in European companies, typically in SAP systems.”
This data forms the foundation for data-driven business models based on the “data flywheel” principle: the more data that flows into a system, the more new data is generated—a self-reinforcing effect that can provide European companies with a decisive competitive advantage.
Manufacturing-X: Germany’s answer to global challenges
Factory-X is part of a larger vision: Manufacturing-X, an industry-wide initiative by the German government launched as part of the Industry 4.0 platform. The goal is to promote digital ecosystems and establish an international standard for data exchange.
Manufacturing-X is based on the fundamental principle of data sovereignty and addresses a classic dilemma: companies need data from others for digitalization but want to protect their own sensitive information. The solution is a legally and technically secured framework in which data can be shared in a controlled manner without owners losing control over it.
The initiative encompasses various industry-specific projects: Catena-X for the automotive industry was the pioneer, followed by Factory-X for mechanical engineering, Chem-X for the chemical industry, and Semiconductor-X for the semiconductor industry.
From horizontal to vertical integration
While Catena-X revolutionized horizontal supply chain processes in the automotive industry, Factory-X goes a step further. “Factory-X extends the proven Catena-X concepts to additional industries and brings vertical integration down to the shop floor,” says Nadine Kanja, solution head for SAP Industry Network Automotive and Catena-X.
SAP shares consortium leadership for Factory-X with Siemens and coordinates the work of 47 consortium members. What’s special: while Catena-X viewed the factory as a single block, it’s at the center of Factory-X. “The shop floor is our central focus because that’s where machines with their own suppliers and maintenance requirements are located,” Kanja explains.
New use cases drive greater manufacturing flexibility
“The goal is to extend supply chain flexibility to the manufacturing area,” Kanja says. “When technical problems arise or customer needs change, manufacturers must be able to pivot quickly. However, factories aren’t exactly known for their flexibility—machines are permanently installed and hardwired. Rebuilding all of this is an enormous effort.”
This is exactly where Factory-X comes in. The initiative aims to bring flexibility directly into manufacturing—not just logistics—through new concepts like modular production, manufacturing as a service, and on-demand manufacturing. “This is an essential part of Factory-X: the flexibilization and automation of actual production processes,” Kanja explains.
Factory-X focuses on use cases that fall under the motto of “individualization and customer centricity.” These include:
- Collaborative information logistics: Optimizing information flows between partners
- Condition monitoring: Monitoring the condition of equipment and machines for proactive, data-based maintenance decisions
- Modular production: Flexible production concepts for changing requirements
- Manufacturing as a service: On-demand manufacturing through digital marketplaces
Concrete business benefits
The Factory-X use cases promise measurable improvements for various business models. Condition monitoring, for example, enables proactive maintenance instead of reactive repairs. This not only reduces production costs and downtime but also opens up new digital service revenues for machine manufacturers from their installed base.
Manufacturing as a service revolutionizes capacity utilization: production companies can automatically receive orders through digital marketplaces that match their capabilities and available capacities without extensive sales activities. Standardized data models even enable the economic production of individual pieces (“lot size 1”), which means individualization without cost disadvantages.
Another competitive advantage lies in access to new partners. Through the open data ecosystem, companies can collaborate with supply chain partners without needing existing business relationships, as standardized mechanisms make integration faster, more secure, and more cost-effective.
Technological innovation: MX-Port as key
Factory-X extends the Manufacturing-X initiative not only thematically but also technologically. In addition to the established Data Space protocols from Catena-X, Factory-X introduces the MX-Port concept, which additionally builds on the Asset Administration Shell (AAS) Framework and Open Platform Communications Unified Architecture (OPC-UA).
“The existing protocols have a relatively high technological overhead to negotiate each time who can see what,” Kube explains. “In mechanical engineering, there are many use cases where this is not necessary. Therefore, we supplement the existing protocols with a second one that has similar characteristics but with less overhead.”
This dual-technology strategy enables companies active in both the automotive industry and mechanical engineering to flexibly use the appropriate technology for each case.
The path to the future
Factory-X is designed as a development project until mid-2026 and will then transition into a stable operational phase. The vision is ambitious: a digital ecosystem that strengthens the competitiveness of European industry while enabling new data-driven business models.
“What we’re building in Factory-X can also be scaled to the other data spaces of Manufacturing-X,” Kanja explains. Mechanical engineering thus becomes a testing ground for a comprehensive transformation of European industry.
