The AI-Powered Factory: Dynamics 365 Innovations for Intelligent Manufacturing
- Parker Jacobs
- Sep 4
- 6 min read
The opportunity for manufacturers
The manufacturing industry is ripe for disruption and Dynamics 365 with Copilot AI present an opportunity for massive efficiency gains. PS Hummingbird works with industrial and manufacturing clients who are looking to:
Unify and better use their data. Manufacturers manage enormous amounts of data, often stored in siloed systems. By bringing together machine telemetry, demand forecasts, production schedules, labor costs, and other key data points, manufacturers can generate real-time actionable, insights, something humans and traditional systems struggle to keep up with.
Increase profit margins. Manufacturing is capital-intensive, with tight margins and rising input costs (raw materials, energy, labor). Even small percentage improvements in throughput, yield, or scrap reduction translate into millions of dollars saved. Predictive maintenance, dynamic scheduling, and optimized inventory placement can directly protect profit margins.
Meet workforce challenges. The sector faces an aging workforce and persistent labor shortages, especially in skilled trades. Microsoft AI-powered solutions can help augment limited human capacity, capture tribal knowledge, and onboard new workers more quickly.
Reduce supply chain volatility. Global disruptions have exposed vulnerabilities in supply chains. AI-driven demand forecasting, scenario planning, and supplier risk analysis are key tools for building resilience. Generative AI and digital twins can be used to model supply chain risks and suggest adaptive strategies.
Meet rising customer expectations. Customers now expect faster lead times, more customization, and higher quality. We can help manufacturers to move toward “lot size one” production by optimizing production schedules, enabling predictive quality control, and tailoring offerings without sacrificing efficiency.
Modernize technology to modernize operations. Cloud platforms, IoT sensors, and low-cost automation provide the foundation innovation. We ensure manufacturers have the infrastructure to modernize at scale on the shop floor—something that was not feasible even a decade ago.
New Features in Dynamics 365: The Future of Microsoft AI-Driven Intelligent Manufacturing
Microsoft continues to expand the manufacturing capabilities of Dynamics 365 Supply Chain Management and the broader Microsoft Cloud for Manufacturing. Recent release plans (2024–2025 waves) and product announcements show a strong focus on AI powered automation, intelligent shopfloor execution, and end-to-end supply chain traceability. Key new and upcoming features include:
AI powered Copilot experiences
Conversational in product help – Users can ask natural language questions such as how to send a sales order for picking or reopen an inventory period. Copilot reads contextual data and returns step-by-step guidance without leaving the current page.
Demand planning with Copilot – Demand planners get a cursor prompt that returns natural language analyses of trends and anomalies across product, location and time dimensions, improving forecast accuracy and supply chain decision making. Copilot can also suggest follow-up questions to guide exploration.
Context aware summaries – On purchase order, sales order, vendor and product pages, a new “Summary by Copilot” Fast Tab (and hover cards) surfaces information such as confirmed/received/invoiced lines, overdue items, vendor status, rebate agreements and critical product attributes.
AI insights for warehouse workers – The Warehouse Management mobile app now includes a workload screen that shows tasks remaining and worker counts and uses generative AI to offer insights about available work, helping supervisors plan activities and communicate with employees.
Trace and solve quality issues with Copilot – A new copilot experience uses the supply chain traceability add-in and AI to gather details about a quality issue (serial numbers, batch information, custody events) and summarizes product status so QA, production managers and field service workers can respond quickly.
Advanced demand forecast explainability – Planned for 2025, the Copilot “grid cursor” decomposes forecast cells into baseline values, adjustments and comments, giving planners cell level explainability of forecasts, and generative insights detect clusters based on seasonality, trends and ABC/XYZ classification.
Intelligent shop‑floor and warehouse execution
Autonomous inventory reslotting – Supply Chain Management uses intelligent analysis of real-time demand to reslot inventory, placing high demand items closer to pickers; this reduces walk time and improves throughput.
Wrist mounted scanning and labor tracking – The warehouse mobile app now supports wrist mounted scanners like ProGlove to reduce scanning time and physical strain. It can also capture worker IDs when packing containers and integrate with external labor management systems to monitor productivity and plan incentives.
Quality control on the shop floor – New sampling plans, skip lot testing, instrument calibration, and acceptance sampling charts help manufacturers conform to ISO/ANSI standards. Quality orders now work for goods in transit, ensuring materials are tested before reaching the warehouse.
Lean manufacturing and catchweight consumption – Planning optimization adds support for lean manufacturing scenarios, catchweight pricing (for variable weight products such as meat), and step consumption for materials with nonlinear usage.
Decoupled production registration (future) – Planned features will allow frontline workers to register production and project time separately from time and attendance, improving labor accuracy (not yet fully detailed in the citations but listed as an upcoming feature).
Supply chain traceability, procurement and supplier engagement
Supply Chain traceability service – A cloud native add-in captures chain of custody data (serial/batch numbers, as-built BOM) and supports forward/backward searches to trace consumption of materials; it exposes this data via API to ERP and other systems. The service allows linking of components and finished good serial or batch numbers and will soon store additional tracking attributes (such as temperature and operator ID) to meet regulatory requirements.
Supplier communications agent – A Copilot agent automates procure-to-pay tasks. This agent drafts follow-up emails for late vendor orders, interprets incoming vendor messages to identify confirmations or change requests, and updates purchase orders based on rules, saving buyers time and improving resilience.
Supplier engagement app and portal – A new Power Apps workspace provides supplier performance dashboards and schedules, while a portal supports onboarding and collaboration during RFQs, purchase orders and invoicing.
Vendor rebate management and unified pricing – Enhancements include resubmission workflows, improved posting profiles for reconciling transactions by purchased from vendor, and unified pricing management that allows negotiated net prices without further discounts.
Contract lifecycle management integration – Planned integration with external CLM systems simplifies managing NDAs and purchase agreements using Dynamics master data.
Inventory and logistics improvements
Timeseries inventory visibility – The Inventory Visibility service can import planned inbound/outbound changes and provide available-to-promise (ATP) queries showing projected inventory levels up to 180 days in the future. It supports external system queries for accurate order promise dates.
Reproduce business documents for bundles – Dynamics can now reprint original sales order confirmations and invoices for product bundles even after deletion or archiving, ensuring records are available for regulatory or customer service needs.
Weighted average recalculation and archiving – New options allow including transactions not yet financially updated when recalculating weighted average costs. Historical inventory journals can be archived to a datalake to improve performance and reduce storage costs.
Additional inventory improvements – Microsoft has announced they are working on additional inventory features such as: synchronizing external changes via Inventory Visibility; querying inventory without site or warehouse information; and archiving inventory transactions.
Manufacturing data solutions
Manufacturing data solutions in Microsoft Fabric – In private preview, these solutions ingest data from machines (OT) and enterprise systems (IT) into a Lakehouse, forming a digital thread. Combined with the Copilot template for factory operations, plant personnel can query complex operations like “Why did a motor overheat at station 4 yesterday?” The system returns root cause analysis and suggests mitigations.
Factory Operations Agent and Safety Agent – Azure AI offers prebuilt agents for factory operations (now available in Copilot Studio). They let operators ask questions about production or safety and access step-by-step instructions, incorporate safety checklists and reference guidelines. A separate Safety Agent helps ensure compliance with OH&S standards.
Digital engineering integrations – Partnerships integrate engineering BOMs with Microsoft Fabric so that generative AI can assist with product design and lifecycle management.
Mixed reality and frontline service
Copilot for Field Service – New generative AI features let managers and technicians use natural language to retrieve workorder details, generate summaries or follow-up emails, find product manuals and launch Teams remote assist calls. These capabilities speed up issue resolution and reduce the need to navigate multiple screens, improving first time fix rates.
Remote assist and connected field service – The integration of Dynamics 365 Field Service with HoloLens and Teams enables technicians to perform guided repairs, call experts and capture inspections; these experiences are being enhanced with generative AI suggestions and summaries.
Ready to start building an Intelligent Manufacturing framework?
These enhancements illustrate Microsoft’s emphasis on intelligent, AI-driven manufacturing. By embedding Copilot experiences across planning, procurement and shopfloor operations and unifying operational data in Microsoft Fabric, Dynamics 365 enables manufacturers to boost productivity, reduce waste and improve traceability across the product lifecycle.
By working with PS Hummingbird, manufacturers can shift from reactive to proactive by embracing modern Microsoft technologies. Start your journey by reaching out to our team.