The initial stage in the facilities design of cellular manufacturing systems involves the identification of part families and machine groups and forming cells possessing specific manufacturing capabilities. A new heuristic for the part family/machine group formation (PF/MGF) problem is presented in this paper. The distinguishing feature of this heuristic is its consideration of several practical criteria such as within-cell machine utilization, work load fractions, maximum number of machines that are assigned to a cell, and the percentage of operations of parts completed within a single cell. Computational results, based on several examples from the literature, show that this heuristic performs well with respect to more than one criteria. The heuristic also clarifies the source of various arguments in the literature concerning the ‘goodness’ of the solutions obtained by other researchers. An application of the heuristic to a large sample of industrial data involving 45 workcentres composed of 64 machines, and 305 parts is given, and the usefulness of the heuristic for trading-off several objectives is illustrated.