The conversion of a functional layout into a cellular manufacturing sy
stem involves the partitioning of several multiserver work centers. Th
e loss of pooling synergy in this process can be significant, and this
paper investigates the impact of several measures to overcome the adv
erse effects on flow time, work-in-process inventory and machine utili
zation. These can be alleviated to a certain extent through reductions
in setup times and lot sizes that has been traditionally emphasized i
n group technology, but a more concerted effort is required. Analytica
l models are first utilized to investigate the extent to which these a
dverse effects can be overcome through (1) reduction in setup time, (2
) lot sizing, (3) reduction in the variability of process-times and jo
b arrivals, and, (4) reduction in processing times through productivit
y improvements, all arising from part family-oriented processing. Thes
e insights are verified through a simulation comparison of five cellul
ar manufacturing systems with a functional layout system in which opti
mal lot sizes, low move times and a part family-oriented scheduling ru
le are used.