Maximizing the throughput (or revenue generation) rate has become one of die most important criteria in die design and management of Flexible Manufacturing Systems (FMSs). This paper develops dynamic part-allocation policies for FMSs having finite storage capacity at each work station. Maximizing the throughput rate means that the resulting queueing network model has a state-dependent arrival process; therefore, product-form solutions do not hold. Consequently, several alternative modeling approaches are described and formulated for deriving die optimal part-routing policies. One of these optimal policies is based on a new initiated-suspension part-routing strategy. This strategy results in a reduced load on the material handling system while increasing die expected throughput (or revenue generation) rates of the manufacturing work stations. We also propose several efficient closed-loop heuristic policies that exploit die response structure of die optimal policies. These heuristic policies are of practical significance because they are extremely easy to compute and to implement, while die resulting FMS performance is nearly optimal.