This paper describes a method for layout design of a Cellular Manufacturing System (CMS) that would allow simultaneously, the grouping of machines unique to a part family into cells and those shared by several cells to be located together in functional sections. Using an illustrative example, this integration of the flexibility of a functional layout, the reduced handling gained from cell formation and allowance of limited intercell flows among adjacent cells is described. Thereby, the traditional strategy of simultaneous formation of part families and distribution of machines into independent cells which creates machine distribution and unbalanced utilization problems is avoided. This is justified by an analysis of the complex interactions between the critical subproblems in cell formation—machine grouping, part family formation, distribution and utilization of shared machines, intracell layout, intercell (or shop) layout and material handling. This approach represents a new direction in cell formation where, by allowing the handling function to limit the extent of machine duplication between adjacent cells, a new graph theoretic structure for simultaneous machine grouping and layout design was developed and validated.

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