The transition from linear to circular manufacturing systems (CMS) is essential for manufacturing firms aiming to enhance sustainability and mitigate resource depletion. Despite clear environmental and economic benefits, the adoption of circular economy (CE) principles within the manufacturing sector remains limited, largely due to significant technological, operational, and organisational barriers. This study addresses these issues by exploring the specific challenges that manufacturing companies face during their transition to CMS and proposes digital technologies to effectively overcome these barriers. Utilising an exploratory, qualitative, single-case study approach, we investigated a European white goods manufacturer implementing a refurbishment centre aimed at establishing circular practices within their laundry appliance segment. Through thematic analysis, we identified three primary challenges: uncertainty regarding the condition of returned appliances due to limited consumer data sharing, insufficient durability and longevity data from laboratory tests of new models, and operational inefficiencies due to inexperience with dismantling and refurbishing processes. To address these challenges, we propose advanced digital solutions leveraging Internet of Things (IoT), Artificial Intelligence (AI), and Augmented Reality (AR) technologies. Specifically, IoT and AI-based systems are recommended for comprehensive product tracking, real-time condition monitoring, predictive maintenance, and informed decision-making, significantly improving data availability and accuracy for refurbishment operations. Additionally, we suggest AR-enhanced workstations to assist workers in dismantling processes, enhancing operational efficiency, reducing error rates, and facilitating knowledge management across diverse product models. Our findings extend the current body of knowledge on CE barriers, particularly in relation to IoT capabilities and consumer data-sharing practices and highlight practical implications for manufacturers seeking effective digital interventions. This research underscores the critical role of technology integration and organisational readiness in achieving successful CMS transitions.