In this study, a goal-programming model is proposed for the design of hybrid cellular manufacturing (HCM) systems, in a dual resource constrained environment, considering many real-world application issues. The procedure consists of three phases. Following an initial phase involving a Pareto analysis of demand volumes and volatility, a machine-grouping phase is conducted to form manufacturing cells, and a residual functional layout. In this phase, over-assignment of parts to the cells, machine purchasing cost, and loss of functional synergies are attempted to be minimized. Following the formation of cells and the functional layout, a labor allocation phase is carried out by considering worker capabilities and capacities. The total costs of cross-training, hiring, firing and over-assignment of workers to more than one cell are sought to be minimized. An application of the model on real factory data is also provided in order to demonstrate the utility and possible limitations. The industrial problem was solved using professional mathematical programming software. (C) 2008 Elsevier Ltd. All rights reserved.