Small Job Shops Which Were Earlier Catering As Ancillaries to the Larger Factories, Have Emerged As Real Profit Centers By Earning Their Livelihood Through “Flexible Production” In Accordance With the Variety of Demand. This Situation Has Suggested For an Essential Change In the Design and Operation of Manufacturing Set-Ups. Managers Have Realized That Running the Large Units As an Optimized and Effective Combination of a Number of Smaller Units Will Make the Industry Flexible, According to the Demand Changes. This Concept Is Technically Explained In the Form of Cellular Manufacturing, and Is Therefore the Right Approach For Such Situation. This Paper, While Taking Reference of an Automotive Manufacturing Unit In Pithampur (Mp), Presents a Model For Cell Formation That Allows For Period-To-Period Demand Variability and Considers the Size of the Cell When Determining the Cost to Process Each Part. the Model Also Allows the Composition of a Cell to Be Changed from Period to Period. Five Heuristic Procedures Are Presented and Tested. the Best Procedure Is Also Compared With Two Other Traditional Approaches. the Results Show That Considering Demand Variability and Changing the Cell Composition During the Planning Horizon Can Result In Better Solutions.