Determining configuration of production facilities is a difficult problem. To solve this problem, the authors introduce the Cellular Manufacturing System as a rapid prototyping and strategic decision-making tool for configuring facilities and product task assignment. At the conceptual design stage of the cellular manufacturing system, there is no decision about facility configuration and product or machining task assignment. The configuration and assignment are determined by self-organization at the operation stage. This makes it possible for the cellular manufacturing system to decide strategic facilities configuration adapting to changing manufacturing requirements. This paper describes a model of the cellular manufacturing system and its self-organization algorithm through software simulation.