Cellular manufacturing (CM) has emerged as an alternative to conventional batch-type manufacturing owing to the former's capability of reducing set-up times, in-process inventories and throughput times. It provides the basis for implementation of just-in-time (JIT) and flexible manufacturing systems (FMS). The machine-part group formation is an important issue in the design of CMSs. This paper presents objective functional clustering algorithms for cell formation problems in the design of cellular manufacturing systems. A deterministic objective functional algorithm (hard clustering) and a fuzzy objective functional algorithm (fuzzy clustering) are used to form the part families and machine cells simultaneously. A collection of data sets from open literature is used to test these algorithms. A software package has been developed to verify the implementation. © 1994 Springer-Verlag London Limited.