Flexible manufacturing systems technology requires a versatile means of moving parts and components from one point to another within the production process, a function which is increasingly being performed by means of Automatic Guided Vehicle (AGV) systems. Conventionally, such systems have operated by following a buried cable or a line marker on the floor of the building. More recently, Free Ranging Automatic Guided Vehicles (FRAGV) using laser based triangulation and other techniques have made an appearance, while navigation systems based on the use of binocular or trinocular vision are under development. However, the bulk of the AGVs currently deployed or likely to be deployed in the near future will almost certainly be of the conventional, line following type. This paper discusses a means by which the operational flexibility of such AGVs can be enhanced by introducing a navigation system based on the use of a series of encoded ‘tiles’. These ‘tiles’ can be rapidly positioned on a floor, and operate in association with a vehicle mounted sensor array as detector to provide information on the current position and heading of the AGV, enabling it to manoeuvre ‘off-wire’ in situations such as docking or at complex junctions. The construction of the ‘tiles’ and the operation of the sensor array are presented, together with the software structures required for navigation.