Optimal system design at the conceptual functional level, i.e., before the embodiment of the functions is determined in detail, focuses primarily on performance. Embodiment determines the geometry and position of subsystems and components, which must be packaged usually within strict spatial envelops to achieve compactness or other external requirements such as styling. Packaging objectives and constraints may therefore compete with performance ones, leading to redesign and costly delays if these conflicts are not addressed early in the design process. This paper presents a design optimization framework for coupled performance and packaging problems. Using the cooling system for a heavy duty tracked series hybrid electric vehicle as an example, we demonstrate the framework combining commercial CAD software with optimization tools and including pipe routing which is a basic requirement in many mechanical systems.