A ccording to researchers at the Lemelsen Center at MIT, radio frequency identification (RFID) is the tenth most innovative technology of the past 25 years. RFID is a technology that helps store data about people or objects on a microchip the size of a grain of sand and then uses radio waves to automatically transmit this data. This eliminates line-of-sight constraints and makes it possible to track individuals or items without costly, and sometimes cumbersome, manual scanning. There are several methods of identification but the most common is to store a serial number (or any other information) that identifies a person or an object, on the microchip that is attached to an antenna (the chip and the antenna together are called RFID tag). Antenna enables the chip to transmit the identification information to a reader. The reader converts the radio waves reflected back from the RFID tag into digital information that can then be passed on to the computers for processing.

RFID tags can be placed on all kinds of objects such as consumer goods, shipping containers, high-value equipment, and even human beings so that their movement and location can be easily tracked. A school in the US is putting it into the I-cards of students to track student movement in the campus.

RFID's adoption is being driven by not only the cost saving opportunities that it offers but also the kind of new operational efficiency that it promises to bring in many sectors-from manufacturing to retail. Industry analysts expect the RFID market to grow by 47 percent to reach two billion dollars worldwide by the year 2008.

The retailing industry expects to save billions of dollars by better managing the supply chain using RFID. RFID will not only allow them to track merchandise, and thereby improve their merchandise to consumers, it will also help them minimize losses on account of thefts. One of the most talked deployments of RFID technology has been the one by retailer WalMart. Using RFID, WalMart tracks its inventory as it moves through the supply chain, from its supplier (or manufacturer) to the distribution center, to the retailer stock room and on to the shelf on the sales floor of the stores.

According to a new report, titled The RFID Life Sciences Market from ABI Research, the pharmaceutical industry is turning to RFID as one cure for many problems. Drug counterfeiting may cost the worldwide pharmaceutical industry more than $30 billion annually, and RFID technology is seen as one way to lower that damage. To minimize this wastage, and to raise the level of safety for patients, many pharmaceutical companies are embracing RFID tagging of drug shipments at the item level. At least three major manufacturers-Pfizer, GlaxoSmithKline and Purdue Pharma-have already announced plans to tag their products.

Airline companies too seem to be keen on deploying RFID, primarily for saving the millions that they lose annually on account of misplaced baggage. For example, in the final quarter of 2003, Delta Airlines began implementing RFID technology to track 40,000 pieces of passenger luggage. Typically, with bar code scanners, Delta's success rate was 80–85 percent. In December 2003, however, Delta announced that the RFID-tagged baggage recorded accuracy levels of anywhere between 96.7 percent and 99.9 percent.

Misrouted baggage costs Delta about $100 million per year. RFID technology could cut those costs significantly, the airline is confident. Under Delta's plan, the tags will be embedded in the familiar luggage labels that airlines use to identify a bag's origin and destination. The labels will be scanned at various points in the check-in, loading, and unloading process, giving supervisors the ability to quickly find the location of any given piece of luggage.