The increasing challenges in industry paved the way towards the next generation factory model or namely “Industry 4.0” through the availability and development of recent technologies in ICT such as industrial internet of things (IIoT) and cyber-physical production systems (CPPS). One of the main pillars of this paradigm is Zero defect manufacturing (ZDM), which aims to get workpieces “right the first time”. However, this technological uplift can prove itself to be very challenging in an industrial environment especially when it comes to the choice of available sensors, the motivation behind that choice, and the insurance that they comply with different guidelines for further exploitation in decision support. This is even more relevant when addressing low-volume high-variety industrial entities such as make-to-order (MTO) SMEs, inherently characterized by limited resources and highly variable business processes collaborating to respond to the demands of an increasingly cutting-edged market. This paper presents a collaborative approach to devise a suitable sensor network in an industrial machining environment generally and in an MTO SME context specifically, based on a joint analysis of all business process data related to quality control issues. Furthermore, the paper showcases the benefits of the approach in a real-world case study involving a 3-axis universal machining center as early validation.