Automatic identification, or auto ID for short, is the broad term given to a host of technologies that are used to help machines identify objects. Auto identification is often coupled with automatic data capture. That is, companies want to identify items, capture information about them and somehow get the data into a computer without having employees type it in. The aim of most auto-ID systems is to increase efficiency, reduce data entry errors and free up staff to perform more value-added functions, such as providing customer service. There is a host of technologies that fall under the auto-ID umbrella. These include bar codes, smart cards, voice recognition, some biometric technologies (retinal scans, for instance), optical character recognition (OCR) and radio frequency identification (RFID).

Radio frequency identification, or RFID, is a generic term for technologies that use radio waves to automatically identify people or objects. There are several methods of identification, but the most common is to store a serial number that identifies a person or object, and perhaps other information, on a microchip that is attached to an antenna (the chip and the antenna together are called an RFID transponder or an RFID tag). The 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 computers that can make use of it.

RFID is not necessarily "better" than bar codes. The two are different technologies and have different applications, which sometimes overlap. The big difference between the two is bar codes are line-of-sight technology. That is, a scanner has to "see" the bar code to read it, which means people usually have to orient the bar code toward a scanner for it to be read. Radio frequency identification, by contrast, doesn't require line of sight. RFID tags can be read as long as they are within range of a reader. Bar codes have other shortcomings as well. If a label is ripped or soiled or has fallen off, there is no way to scan the item, and standard bar codes identify only the manufacturer and product, not the unique item. The bar code on one milk carton is the same as every other, making it impossible to identify which one might pass its expiration date first.

It's very unlikely. Bar codes are inexpensive and effective for certain tasks, but RFID and bar codes will coexist for many years.

RFID is a proven technology that's been around since at least the 1970s. Up to now, it's been too expensive and too limited to be practical for many commercial applications. But if tags can be made cheaply enough, they can solve many of the problems associated with bar codes. Radio waves travel through most non-metallic materials, so they can be embedded in packaging or encased in protective plastic for weatherproofing and greater durability. And tags have microchips that can store a unique serial number for every product manufactured around the world.

Many companies have invested in RFID to get the advantages it offers. These investments are usually made in closed-loop systems—that is, when a company is tracking goods that never leave its own control. That's because some existing RFID systems use proprietary technology, which means that if company A puts an RFID tag on a product, it can't be read by Company B unless they both use the same RFID system from the same vendor. Another reason is the price. If a company tracks assets within its own four walls, it can reuse the tags over and over again, which is cost-effective. But for a system to work in an open supply chain, it has to be cheap because the company that puts the tag on a case or pallet is unlikely to be able to reuse it.

One issue is standards. There are well-developed standards for low- and high-frequency RFID systems, but most companies want to use UHF in the supply chain because it offers longer read range—up to 20 feet under good conditions. UHF technology is relatively new, and standards weren't established until recently. Another issue is cost. RFID readers typically cost $1,000 or more. Companies would need thousands of readers to cover all their factories, warehouses and stores. RFID tags are also fairly expensive—20 cents or more—which makes them impractical for identifying millions of items that cost only a few dollars.

Yes. Thousands of companies around the world use RFID today to improve internal efficiencies.

RFID is used for everything from tracking cows and pets to triggering equipment down oil wells. It may sound trite, but the applications are limited only by people's imagination. The most common applications are payment systems (Mobil Speedpass and toll collection systems, for instance), access control and asset tracking. Increasingly, companies are looking to use RFID to track goods within their supply chain, to work in process and for other applications.

RFID technology can deliver benefits in many areas, from tracking work in process to speeding up throughput in a warehouse. As the technology becomes standardized, it will be used more and more to track goods in the supply chain. The aim is to reduce administrative error, labor costs associated with scanning bar codes, internal theft, errors in shipping goods and overall inventory levels.