The objective of this project is to develop a two-level performance model for cellular manufacturing systems where the cells are connected via a material handling system (MHS) and raw material and unfinished parts are stored in an Automatic Storage/Retrieval System (AS/RS). Each cell by itself is a network of workstations sharing a common finite storage space and a load/unload station. These workstations are connected via a material handling unit. The model is such that in one level the individual cells, the MHS and the AS/RS are each analyzed separately. (The interdependency among these components is reflected in the analysis.) The results from this level are then utilized in a second level in order to define an aggregated network of stations each representing a cell, the MHS, or the AS/RS. This network is then decomposed into subnetworks based on a concept originally introduced by the Principal Investigator. The interrelationship between the two levels requires an iterative numerical technique in order to compute different performance measures. From a modeling perspective, the model makes two significant contributions: (1) it explicitly considers the MHS and the AS/RS, (2) it accounts for different scheduling policies and, therefore, reflects the dynamic nature of the system to some degree. From an application perspective, the model may be used in different circumstances, ranging from the analysis of an individual cell to the analysis of a large scale network type manufacturing system.