A promising technology known as radio frequency identification, or RFID, is helping businesses keep track of inventories with greater efficiency than ever before. Developed initially for livestock, RFID systems use transponders the size of a grain of rice to track anything from packages and pets to people.

Although RFID is still in search of its definitive application, the tracking device has found important uses in the area of operations management. Wal-Mart Stores, Inc. reported recently that using RFID tags for inventory management has significantly reduced its out-of-stock product. Research conducted by the University of Arkansas discovered that Wal-Mart stores using radio-transmitting tags outperformed on inventory-related tests. The study showed that RFID labels reduced out-of-stock items by 16 percent, a significant increase compared with stores not using the technology.

Analysts believe that radio frequency identification tagging will surge in the next decade as marketers, retailers, and consumers become more aware of the technology's benefits. Supply chain uses like those at Wal-Mart, as well as at other retailers like Best Buy and Target, have been the focus of recent interest in RFID, mainly because the tags provide more information on products than do bar codes. Though privacy groups and others express worries about potential tracking abuses, radio frequency ID chips are heading for widespread deployment as companies seek to use them to track products, parts and inventories.