Abstract Tool exchange is an important task in actual operation of a flexible manufacturing system, especially in the case of limited tool capacity of the central tool magazine in an FMS and the local tool magazine on a machining centre. Effective scheduling strategy or rules for tool transportation will increase the utilization of a machining centre, as well as the overall efficiency of an FMS. In this paper, we introduce our research work for improving the scheduling strategies for tool exchange to increase the efficiency of an FMS. At the initial operation of an FMS, a simple scheduling rule combination for tool exchange, called ATE and RSTH is used. In the actual evaluation of the operation of the FMS, its efficiency is found to be very low and the utilization of the machining centre is below 70%. Simulation and analysis for the FMS are made and a new scheduling strategy combination called STE and WPN is tested. Results indicate that the utilization of the machining centre has been increased to about 75%. This new scheduling strategy has increased the operation efficiency of an FMS.