The manufacturing environment on which this research is focused is an FMS in which AGVs are used for material handling and each part type has one or more process plans. The research aims at developing a methodology whereby, given a part and volume mix for production during any production session, the best set of process plans including one plan per part type is selected and the best unidirectional AGV guidepath can be dynamically reconfigured in response to changes in parts and lot sizes combination. For the integrated PPS/FGD problem in which two functions of process plan selection (PPS) and flexible AGV guidepath design (FGD) are integrated, a zero-one integer programming model is developed. The integrated problem is decomposed into two subproblems, process plan selection given a directed AGV layout and AGV guidepath design with a fixed process plan per part type. A heuristic algorithm that alternately and iteratively solves these two subproblems is developed. The effectiveness of the heuristic algorithm is tested by solving various randomly generated sample problems and comparing the heuristic solutions with those obtained by an exact procedure. From the test results, the following conclusions are drawn: 1) For a reasonable size problem, the heuristic is very effective. 2) By integrating the two functions of PPS and FGD, a remarkable benefit in total production time for a given part and volume mix is gained.