Materials-handling systems are an integrating component of manufacturing operations and as such must be considered within a common framework in manufacturing systems design. This work proposes a ®rst approach to the simultaneous consideration of the operation allocation and the materials-handling system selection problems in a¯exible manufacturing system. The objective of the operation allocation model is to select a group of machines where the operations of the part types will be performed and then to assign those operations to the selected machines. The operation allocation model interfaces with the materials-handling system selection model by providing input data in the form of the manufacturing operations to be performed at each machining centre. The selection of the materials-handling system is centred on the matching of the parts visiting a machining centre to perform a manufacturing operation and the abilities of the handling equipment to perform the required materials handling functions of those part types. The objective is to select an optimal group of materials-handling equipment to be assigned to a cell.