After you defeat Cloaker and Domino and a snake, you reach a new part of the Factory.

Defeat Mad Mallets

Go northwest and there will be a cutscene. Then you will have to battle some Mad Mallets. They are weak to Thunder, but they are slightly weaker to regular attacks than to Special attacks.

Defeat the Clerk

After you defeat them, you have to fight the Clerk, who has two Mad Mallets with him. He can cast Valor Up and Vigor Up, which increase attack and defense.

Afterward, go northwest and there will be a cutscene. After that, go northwest and there will be another cutscene. Then you can purchase things from Toad, but make sure to leave at least one space free in your inventory. After you are done shopping, Toad gives you a Rock Candy. You can talk to Toad again to buy more things if you want. Then go northwest to the next screen.

Defeat the Manager

After a cutscene, you have to battle the Manager and four Pounders. Afterward, go northwest to the next area.

Defeat the Director

There will be another cutscene, and you will battle the Director and four Poundettes.

Go northwest, save at the Save Block, optionally go southeast and buy stuff from Toad, then go northwest and you must defeat the Factory Chief and Gunyolk.

Defeat Factory Chief and Gunyolk

The Chief has high attack and can use Thornet. Gunyolk is weak to Thunder. Gunyolk can use Mega Drain and Electroshock on a single character. It can also use Breaker Beam, the high-damage attack that the Axem Rangers used. Try to defeat Gunyolk first to stop it from casting Breaker Beam.

After the battle, there will be a cutscene. You can go back to the Save Block and save, and you can go back to Toad to buy items. When you're ready, go northwest and step on the switch in the room where you fought the Factory Chief and Gunyolk. There will be a cutscene, then you will finally be face to face with the ultimate enemy of the game, Smithy.