The purpose of the study is to design an effective production layout considering the operation process, variety, and volume of products to improve interrelationships, minimize the overall distance traveled, reduce handling time, enhance production volume, and optimize the total material handling cost. Fasil engineering company was selected as a case study because the manufacturing process had been followed a job-shop process, but the machines were installed without considering the product operation process. As a result, workers have traveled longer distances and consumed high material handling costs rather than handling time and production capacity. The study achieved both adjacency and distance objectives using CORELAP and CRAFT algorithms as a method. First, CORELAP was applied for the maximum interrelationship between departments using a total closeness rating. Then, CRAFT was applied for minimum travel movement by swapping two departments with common boundaries. Both primary and secondary data collection used, such as three-year production volume, initial layout, department dimension, number of available departments, and operation process for each product have been collected. However, the collected data and the analysis are presented in from to relationship charts, relationship charts, tabular and operation process charts. The current and the proposed layout have been designed using solid work software. Indeed, the existing production layout was evaluated in the CRAFT Excel Add-in, then CORELAP followed by the CRAFT excel add-in was developed to optimize the production layout. In addition, a simulation model was developed using ProModel version 7.5 for both the existing and proposed layouts to evaluate the material handling time and production capacity. As a result, the material-handling costs between the existing and the proposed layout were reduced by 74.32% per month, while the total distance traveled was minimized by 22.1%. In addition to this, the production capacity increased in the proposed layout, and the average handling time was saved by 162.03 minutes per month. Those results have been optimized the overall operational efficiency, manufacturing lead-time and productivity effectivity. Therefore, the research concludes that combining two algorithms have optimized the production layout effectively. Key words: CORELAP, CRAFT, ProModel Simulation, Total Material Handling Cost, Distance Traveled, Handling Time, and Production Capacity.