A novel cell formation algorithm has been introduced in this paper. The motivation of the research is the lack of attention in important information, e.g., production demand (or part-volume), in the most of the cell formation techniques. For example, one of the crucial steps in the design of a cellular manufacturing system is the cell formation problem, which involves grouping the parts into part families and machines into machine groups. It has been found that 80% of the cell formation problems consider only 0-1 (binary) machine-part incidence matrix that ignores the sequence of operations in manufacturing parts. Further, literature reveals that only a few studies consider alternative routing. In order to cope with this situation a new cell formation algorithm, considering the factors sequence of operation, alternative routing and part-volume, is introduced.