Intelligent manufacturing system (IMS) has been the focus of most industries since Industry 4.0 revolution. IMS is being implemented through the integration of Internet of Things, (IoT), Cyber-Physical Systems (CPS), digital twin and big data analytics to optimize production through smart manufacturing. This research presents a conceptual approach of an adaptive clustering algorithm (ACA) for advanced manufacturing decision-making for smart machining manufacturing. The work considers product monitoring and assessment, machine health and operating parameters monitoring, as an important factor for intelligent decision making on a machining production line through the developed cyber twin of the machine tool for production optimisation. Cyber twin of the machine tool is developed which runs on a realtime sequence with the physical asset fussed with smart sensors and controllers enabled with cloud computing, IoT and data analytics. The ACA enables resources monitoring, production monitoring, machine condition monitoring, cloud feedback notification, product monitoring, and assessment, for intelligent decision-making from a cluster of similar machines using ANN clustering tool for self-aware, self-predict and self-reconfiguration in a smart machining production line to detect a cutting tool chipping of less than 0.25mm size. The method is proposed to optimise production by increasing productivity through intelligent decision and prediction for tool change, tool failure, maintenance, adjustment of operating parameters.