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Proposes a two‐stage procedure to design a group technology system. Formulates a 0‐1 quadratic programming model to allocate machines to machine cells and a criterion to form corresponding part families for group technology. The majority of current approaches assume only one copy of a machine type for allocation. This model allows for more than one copy of a machine type. While many approaches use a general integer programming package to solve the group technology problem, proposes a two‐stage procedure based on A* algorithm. Computational experience of the proposed algorithm is also reported.

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