A good layout plan results in improvements in machine utilization, setup time, and reduction in work-in-process inventory and material handling cost. Facility layout problem (FLP) for CMS includes both intercellular- and intracellular-layout. Most of the literature takes a discrete approach and rarely considers operations sequence and part demand. In this paper, a novel bi-level heuristic and mixed-integer non-linear programming continuous model for the layout design of cellular manufacturing are developed. Machine tools and manufacturing cells layout are determined sequentially by solving a leader and follower problem, respectively. Facilities are assumed unequal sizes. Both overlap elimination and aisle constraint modeling have been considered. The model is nonlinear; problem is NP-hard. Hence, only small instances of the problem can be solved using the exact linearized model. The developed heuristic is used to solve large instances of the problem. A real case study from the metal cutting inserts industry, where multiple families of inserts have been formed, each with its distinguished master plan, is presented.

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