This paper discusses the problem of machine-component cell formation in group technology. Many approaches reported in this area, after Burbidge's pioneering work in production flow analysis, make use of the similarity coefficient of the additive type. This paper presents a heuristic approach based on the similarity coefficient of the product type. The proposed method has also been tested by using the similarity coefficient of additive type. For a large number of problems tested, the method yields a minimum number of exceptional elements. The method is computationally straightforward and is explained through a flowchart.