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Grouping the machines and parts in a cellular manufacturing system based on similarities is known as the cell formation.

This paper proposes a method for design of cell layout for a manufacturing system under dynamic demand environment for automation batch production industry. The proposed method of cell layout has two phases. In the first phase, Rank Order Clustering (ROC) was used to determine the initial cell layout for first period. This Layout was considered as static layout for other periods to calculate material handling cost. The second phase employs the use of an optimization technique (Simulated Annealing algorithm) to solve the proposed