Radio frequency identification (RFID), which uses radio waves to automatically identify goods or people, is on the rise and often used in the retail, manufacturing and transportation industries. How does the technology work? Usually, a serial number is stored on a microchip that's attached to an antenna. The chip and the antenna are called an RFID transponder or an RFID tag. A reader is used to capture the information from the transponder and transfer it to a computer. Software on the computer allows you to manipulate the data for your needs.

RFID offers several advantages over barcodes. Goods can be identified individually with a unique code whereas barcodes can only identify product categories. Unlike barcodes that must be read with a scanner that's pointed directly at the barcode, an RFID reader can pick up serial numbers from a distance, up to 20 feet away in some instances. They can also read hundreds of codes in seconds while barcodes must be scanned individually. They can also reduce the labor costs associated with reading barcodes. On the downside, RFID systems can be expensive, with readers costing upwards of $1,000 a piece and RFID tags starting at about 20 cents each and going up to several dollars each.

RFID systems are most commonly used for:

1. Asset tracking
2. Access control
3. Payment systems
4. Tracking goods within a supply chain
5. Tracking work in process

Action Steps
The best contacts and resources to help you get it done

Look for vendors who work with smaller businesses

To date, RFID systems have been associated with large-scale manufacturers and retailers. However, some vendors have been promoting RFID by working with smaller companies to ensure that they have a positive return on investment.

I recommend: Check out Oat Systems, which will work with firms that want to deploy RFID in a single location.

Implement an RFID system in steps

Determine which areas of your business can benefit from RFID and which business processes must be changed. Create a plan that includes your equipment needs. Do a test drive with your equipment before launching a full-scale deployment. Make sure your provider will be with you every step of the way.

I recommend: Intel provides RFID solutions and offers help at every stage of the deployment process.

Choose RFID frequency

RFID tags and readers must be tuned to the same frequency to communicate. The most common frequencies used are low-frequency, high-frequency, ultra-high frequency and microwave. Note that low- and high-frequency tags are generally recommended for products made of metal or water.

I recommend: A knowledgeable vendor, such as HP or Intermec, can help you choose the right frequency for your RFID system.

Choose RFID tags

RFID tags come in three varieties: read-only, read-write and write-once read many (WORM). The information stored on read-only tags can't be changed. Read-write tags allow you to add or overwrite data. WORM tags have a serial number written to them once and can't be overwritten.

I recommend: Avery Dennison has an RFID division that offers a number of RFID tags and related hardware.

Choose RFID readers

Readers can be 'dumb', 'intelligent' or 'agile'. Dumb readers are the simplest, capable of reading a single type of tag, using a single communication method and using a single frequency. Intelligent readers are essentially computers that can use a number of communication methods and can filter data and run applications. Agile readers can use several frequencies and a number of communication methods.

I recommend: Intermec.com offers one of the widest ranges of readers and other RFID products. RFID.com offers a host of readers and other hardware, including a "starter's kit" that allows users to become familiar with the technology.

Choose RFID encoders

Special encoders or printers are used to write to RFID chips.

I recommend: Find RFID encoders and printers at PrisymIDInc.com or at Paxar.com, which will also do the encoding for you if you aren't ready to invest in an encoder.

Choose RFID software

To get the most out of the data stored in RFID tags, computers must be outfitted with special software.

I recommend: InLogic, TagsWare and Sun Microsystems offer a number of RFID software solutions.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  It's recommended to place a 64-bit or 96-bit number called an EPC (electronic product code) on your RFID tags. You can give each individual item in your inventory a unique EPC so it can be easily identified.
• •  RFID tags can be active or passive. Active tags, which require their own power supply, have longer read range and larger memories but are more costly. Passive tags, which are by far the most commonly used today, don't have their own power source and have a limited read range up to about 5 meters.
• •  Like anything else, deeper discounts occur in quantity. If you order larger quantities, you can reduce the cost significantly