The combined effect of the Internet of Things (IoT) and Industry 4.0 technologies has fundamentally transformed the manufacturing industry, resulting in the development of advanced factories known as smart factories. This study examines the adoption of IoT and Industry 4.0 in the development of future smart factories to enhance the manufacturing industry, with a specific emphasis on their effects on efficiency, productivity, and sustainability. The methodology involved a thorough examination of the current body of knowledge on IoT, Industry 4.0, and smart factories. This encompassed scholarly articles, scientific research, and industrial reports that delve into the assimilation and execution of these technologies in manufacturing operations. The results indicate that incorporating IoT and Industry 4.0 technologies into industrial processes may greatly boost operational efficiency, productivity, and sustainability, minimize downtime, and improve decision-making choices. The IoT facilitates real-time monitoring and management of production processes in a factory by interconnecting equipment, devices, and systems. This real-time data analysis allows for the identification of inefficiencies, the optimization of workflows, and the improvement of decision-making. Moreover, these technologies provide instantaneous monitoring and regulation of manufacturing processes, resulting in enhanced efficiency and reduced expenses. Furthermore, the incorporation of IoT devices and sensors in smart factories facilitates the implementation of proactive maintenance strategies, therefore mitigating equipment malfunctions and diminishing maintenance expenses. In other words, the combination of these technologies allows for predictive maintenance, which involves continuously monitoring equipment performance to anticipate and prevent any breakdowns. Adopting this proactive maintenance method helps to avoid unexpected periods of inactivity, save maintenance expenses, and prolong the operational life of equipment. Furthermore, the study revealed that IoT technologies have the capability to enhance energy management and optimize resource use in industries, resulting in enhanced sustainability and minimized environmental footprint. Therefore, it is imperative to adopt IoT and Industry 4.0 technologies into production sequence in order to develop future smart factories that are adaptable, reactive, and environmentally friendly in the era of industrialization.