This paper presents a developed dynamic mathematical model for designing of cellular manufacturing system in such a way dynamic cell configuration, alternative process routings, lot splitting, sequence of operations, multiple units of identical machines, machine capacity, operation cost, setup cost, cell size limits, production planning, outsourcing and back-order decisions are incorporated simultaneously. According to the presence of alternative process routings concept, system decides on the best routes for processing operations of parts instead of the user specifying pre-determined. This concept also increases the number of ways to form manufacturing cells. We compare our developed model with previous models by using a reversal example. Numerical example shows effectiveness of the developed mathematical model.