The facility layout problem is a very difficult and widely studied optimization problem. As a result, many facility layout models and techniques have been developed. However, the literature does not fully consider or control irregular-shaped departments. In this paper, the nested facility layout problem is defined whereby irregular-shaped departments(i.e. L-shaped, O-shaped or U-shaped) can be generated and controlled. This is a unique problem that can be used to efficiently layout workstations, storage areas and other departments within departments, while arranging the departments with respect to an objective. The objective considered here is to minimize material handling cost. We present a formulation and solution technique for the nested facility layout problem. The formulation consists of a modification of Montreuil’s mixed-integer problem (MIP) to consider nesting departments. Finally, for illustrative purposes, several example problems are solved using the solution technique presented. The nested facility layout model can be used to either produce a more realistic and detailed block layout, or to group departments together (or nest departments within departments), thus enabling larger facility layout problems to be solved
