This study presents a three-stage procedure for designing a line-type cellular manufacturing system with the objective of minimizing operating and material-handling costs. At the first stage, alternate part routeings are considered to determine the best part routeing that minimizes the operating cost. The results from the first stage form a 0-1 part-machine matrix. This binary matrix is used as the input to an ART1-neural-network-based cell formation module to group machines into a specified number of cells at the second stage. The facility layout module of a STORM software is finally used at the third stage to determine the layout and material-handling cost for the cell design. An example is used to demonstrate that the procedure could be used to resolve a load imbalance problem for a focus-factory-based system.