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When alternative process plans are considered in cellular manufacturing systems, there is potential for performing an operation required of a part on alternative machines. Under these circumstances, the cell formation problem of determining the assignment of parts and machines to each manufacturing cell can be viewed as being divided into two phases. The first phase deals with the problem of determining the number of machines of each type and a unique process plan for each part. In the second phase, the assignment of parts and machines to each manufacturing cell should be determined. This research examines the first-phase problem. A realistic formulation of the model is presented when the product-part mixes are stable over the planning horizon. As the problem is proven NP-hard in the strong sense, two different higher-level heuristics, based upon a concept known as tabu search, are presented …