This paper describes a cost-based algorithm that deals with the design
problems of Cellular Manufacturing Systems (CMS) associated exception
al parts and bottleneck machines. The developed algorithm employes exp
licitly the main elements of manufacturing costs, such as the fixed ma
chine cost, the production cost, the setup cost, and the material hand
ling cost. The algorithm is based on the minimization of sum of these
costs, and considers three alternatives to solve exceptional issues. T
he first alternative is to try to eliminate the maximum number of inte
rcellular movements from the presently configured manufacturing system
by buying and installing extra bottleneck machines into the appropria
te cells. The second alternative considers the alternative process pla
ns available and tries to complete the job using the overtime basis in
the small machine cells. The third alternative considers the possibil
ity of subcontracting the processing operations of exceptional part(s)
to outside vendors to reduce the overall cost for the manufacturing s
ystem. The total costs of the three cases are compared and the best al
ternative for any given problem is identified. In order to illustrate
performance of the algorithm developed, a test example is provided.