We address several issues related to design, modeling, and analysis of agile factory layouts. We present a framework for defining and identifying sources of layout flexibility and for mapping different dimensions of flexibility to specific layout configurations. We use this framework to develop several potential measures of layout flexibility and compare the usefulness and limitations of each. We also examine the relationship between factory layout and material handling and show that the realization of layout flexibility largely depends on the configuration of the material handling system. Finally, we present an integrated procedure for flexible layout design in stochastic environments. We use the procedure to demonstrate the desirability of disaggregating functional departments into smaller sub-departments and distributing them throughout the factory floor. We show that increased disaggregation and distribution, even in limited amounts, can be highly effective in enhancing a layout's ability to cope with variability.