Facility planning is a strategic issue in manufacturing planning. A well-designed facility layout will facilitate the production flow, simplify handling of materials, and ensure product flexibility. In production environment, where product mix changes and demand volumes fluctuates, a hybrid cellular layout that includes cell layout and functional groups is probably the most appropriate. Designing a hybrid layout however is a complex problem. This article presents a structured approach to choose appropriate design for a hybrid cellular layout.  The approach is a combination of tools and algorithms that covers the whole facility planning process from data collection, cell formation (Family formation), cell layout and shop layout. One case study where the approach was successfully applied to improve material flow is also introduced.