SME are facing greater challenges due to increased labour cost and reduced cycle times. To adapt to this change more effectively and efficiently they need systems in place that adapt to change easily and seamlessly. This is the case in the customised product and service manufacturing SME sector. Ambient intelligence (AmI) has the ability to help SME to become more flexible to change and build on their already dynamic nature. The ability of the AmI system to adapt and learn in different situations is the key to maintaining the competitiveness in an organisation. This paper seeks to demonstrate the development and implementation of an AmI system in the manufacturing SME environment. It presents an AmI system in industry reference model that highlights the implicit and explicit interaction between the user, process and environment in an AmI system. The reference model is applied to a case study and the benefits arising from implementation are highlighted and discussed.