An entropy generation minimization method is applied to study the thermodynamic losses caused by heat transfer and pressure drop for the fluid in a cylindrical pin-fin heat sink and bypass flow regions. A general expression for the entropy generation rate is obtained by considering control volumes around the heat sink and bypass regions. The conservation equations for mass and energy with the entropy balance are applied in both regions. Inside the heat sink, analytical/empirical correlations are used for heat transfer coefficients and friction factors, where the reference velocity used in the Reynolds number and the pressure drop is based on the minimum free area available for the fluid flow. In bypass regions theoretical models, based on laws of conservation of mass, momentum, and energy, are used to predict flow velocity and pressure drop. Both in-line and staggered arrangements are studied and their relative performance is compared to the same thermal and hydraulic conditions. A parametric study is also performed to show the effects of bypass on the overall performance of heat sinks.