In precision engineering, the degradation of the cutting surface (tool wear) has the greatest affect on accuracy and surface finish of machined parts. Tool wear is the greatest single contributor to scrap (waste material). In the surgical products market, cosmetic finish requirements (16RA) placed on the precision engineered parts continue to be raised to new levels. Similarly, in the aerospace industry parts need to be increasingly accurate in order to increase energy efficiency. Through the development of CNC technology tolerances of 1µm are now possible. However, SMEs see significant failures in the current technology. Currently, errors associated with tool wear remain uncompensated for and are usually only detected at the end of the machine cycle, by which time the product is scrap. If such monitoring were available, machining parameters could be adjusted to compensate for tool wear, tools could be replaced earlier, machines could be scheduled for down-time and surface finish and dimensional stability would be increased. Such advances would have a strong impact on the efficiency of processes and increase competitive advantage. The specific aim of the project is to develop a robust ‘smart’ sensor-based system to provide process a feedback loop to both the CNC machine and the operator.