This work investigates the use of Competency-Based Learning (CBL) with Discrete Event Systems (DES) in rail manufacturing based on the Factory I/O simulation platform. CBL focuses on mastery of a few key skills in automation and manufacturing, giving students hands-on experience in the simulation of real-world processes of rail production. Students learn through work with Factory I/O about PLC programming, system debugging, and process optimization applied in real-world scenarios of rail manufacturing. The provided model offers competency development and assessment in a structured way, outlining improvements in production efficiency, enhancement of fault detection capability, and reduction of the occurrence of downtime. The concept here aligns learning outcomes with the Industry 4.0 smart factory requirements and equips the future professional with the important skills related to advanced rail manufacturing systems, filling up gaps in theoretical education and practical industry requirements. The paper strikes a balance in DES experiential learning through active student participation, hence increasing their interest and comprehension. Dynamic gaming simulation coupled with decision-making procedures will ultimately prepare the future professional to address critical rail manufacturing challenges. This study introduces a practical and feasible method of teaching rail manufacturing knowledge and skills by using the state-of-the-art learning platform to develop accessible materials, adopting effective teaching tools, and collaborating among educators to support competency-based learning.