A multistage algorithm is proposed that will solve the scheduling problem in a flexible manufacturing system by considering the interrelated subproblems of processing time control, tool allocation and machining conditions optimization. The main objective of the proposed algorithm is to minimize total production cost consisting of tooling, operational and tardiness costs. The proposed integrated approach recognizes an important trade-off in automated manufacturing systems that has been largely unrecognized, and which is believed can be effectively exploited to improve production efficiency and lead to substantial cost reductions.