# Fine-Tuned Thoughts: Leveraging Chain-of-Thought Reasoning for Industrial Asset Health Monitoring

arXiv: https://arxiv.org/abs/2510.18817 · HTML: https://mlsanity.com/paper/2510.18817/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- Placed in Prompting and chain-of-thought reasoning, one of 17 directions in LLM reasoning.
- Builds on 13 of its 21 references that are in the map.
- First posted on arXiv 21 Oct 2025.

## Placed in

- LLM reasoning / [Prompting and chain-of-thought reasoning](https://mlsanity.com/lr/prompting-and-chain-of-thought-reasoning/)
- Knowledge distillation / [Knowledge distillation for LLMs](https://mlsanity.com/distill/knowledge-distillation-for-llms/)

## Builds on (most cited first, 13 of 13)

- [Chain-of-Thought Prompting Elicits Reasoning in Large Language Models](https://mlsanity.com/paper/2201.11903/) (2022)
- [FActScore: Fine-grained Atomic Evaluation of Factual Precision in Long Form Text Generation](https://mlsanity.com/paper/2305.14251/) (2023)
- [STaR: Bootstrapping Reasoning With Reasoning](https://mlsanity.com/paper/2203.14465/) (2022)
- [MEDITRON-70B: Scaling Medical Pretraining for Large Language Models](https://mlsanity.com/paper/2311.16079/) (2023)
- [Many-Shot In-Context Learning](https://mlsanity.com/paper/2404.11018/) (2024)
- [Can large language models reason about medical questions?](https://mlsanity.com/paper/2207.08143/) (2022)
- [Orca 2: Teaching Small Language Models How to Reason](https://mlsanity.com/paper/2311.11045/) (2023)
- [A Comprehensive Survey of Small Language Models in the Era of Large Language Models: Techniques, Enhancements, Applications, Collaboration with LLMs, and Trustworthiness](https://mlsanity.com/paper/2411.03350/) (2024)
- [Synthetic continued pretraining](https://mlsanity.com/paper/2409.07431/) (2024)
- [LAB: Large-Scale Alignment for ChatBots](https://mlsanity.com/paper/2403.01081/) (2024)
- [ChemSafetyBench: Benchmarking LLM Safety on Chemistry Domain](https://mlsanity.com/paper/2411.16736/) (2024)
- [PertEval: Unveiling Real Knowledge Capacity of LLMs with Knowledge-Invariant Perturbations](https://mlsanity.com/paper/2405.19740/) (2024)
- [FailureSensorIQ: A Multi-Choice QA Dataset for Understanding Sensor Relationships and Failure Modes](https://mlsanity.com/paper/2506.03278/) (2025)

## Built on by (most cited first, 1 of 1)

- [IndustryAssetEQA: A Neurosymbolic Operational Intelligence System for Embodied Question Answering in Industrial Asset Maintenance](https://mlsanity.com/paper/2604.23446/) (2026)

## Abstract (arXiv)

Small Language Models (SLMs) are becoming increasingly popular in specialized fields, such as industrial applications, due to their efficiency, lower computational requirements, and ability to be fine-tuned for domain-specific tasks, enabling accurate and cost-effective solutions. However, performing complex reasoning using SLMs in specialized fields such as Industry 4.0 remains challenging. In this paper, we propose a knowledge distillation framework for industrial asset health, which transfers reasoning capabilities via Chain-of-Thought (CoT) distillation from Large Language Models (LLMs) to smaller, more efficient models (SLMs). We discuss the advantages and the process of distilling LLMs using multi-choice question answering (MCQA) prompts to enhance reasoning and refine decision-making. We also perform in-context learning to verify the quality of the generated knowledge and benchmark the performance of fine-tuned SLMs with generated knowledge against widely used LLMs. The results show that the fine-tuned SLMs with CoT reasoning outperform the base models by a significant margin, narrowing the gap to their LLM counterparts. Our code is open-sourced at: https://github.com/IBM/FailureSensorIQ.