Over the past three decades considerable amount of research work has been reported in the literature of Group Technology (GT). Most of the research work is concerned with formation of machine cells and part families. This is because cell formation is considered to be the most complex and the most important aspect of Cellular Manufacturing System (CMS). Due to NP completeness of cell formation problem, many heuristics have been developed. These heuristics are developed for both single as well as multiple objectives for the comprehensive cell formation. Here all part types and machine types are considered at a time for cell conversion and that all cells are designed at a single point in time. But planning and implementation of most cell conversions in industry are incremental ones, and not comprehensive. This issue has not been addressed in GT literature adequately. In this paper we consider multiple objectives for incremental cell formation and develop, a lexicographic based simulated annealing algorithm. The performance of the algorithm is tested over several data sets by taking different initial feasible solutions generated using different heuristics. © Springer Science + Business Media, Inc. 2006.