Radio Frequency Identification or RFID is the use of radio waves to identify objects. This means, unlike a barcode, one can track an item without actually having to come in contact with it. The way it works is that an identifying serial number is stored in a microchip which is then attached to an antenna. (Together these are called the transponder or tag.) The chip is now able to transmit any identifying information to the receiver. The reader will convert the information to a digital format to be read by computers.

Radio Frequency Identification isnt new. Its been around since the 80s and is already being used in toll booths, automotive ignitions, and security access badges. Businesses that use this system will be able to track products throughout the whole manufacturing process, from the beginning of the conveyor belt to the packaging and beyond. These items can also be tracked while being shipped, received, and even sitting on the store shelves.

Benefits of RFID include:

- The ability to eliminate time consuming bar-coding or other tracking processes. Instead, all data can be collected along the production line. This also helps to lower production costs.
- Prevention of the distribution of counterfeit products.
- Elimination or reduction of theft and loss.
- Reduction of supply chain cost.
- Elimination of data entry and other tedious manual business process transactions.
- Increase in order fulfillment time
- Less time spent in check out lines, as consumers will only have to push their shopping carts in front of the readers.

On the downside is the high cost of the RFID hardware. Tags alone can cost twenty five cents each or more which means many retailers wont get much of a return, if any, on their investment. Is this the wave of the future? Many think so. The real test will be in 2005 when Wal-Mart begins to implement an RFID system. Its hoped that with Wal-Mart as well as the Department on Defense using RFID, the prices of the tags will drop to five cents each will making it a more affordable solution for many.