Radio frequency identification (RFID) tagging has been hailed by some as the future of inventory and supply chain management. According to supporters such as Wal-Mart in the US and Tesco and Marks & Spencer in the UK, RFID will make it easier to manage product lines from manufacturing through to the shop floor, and will help firms decide how much inventory is needed, where and when.

Pam Lopker, president of supply chain specialist QAD, said that RFID would have a massive impact on supply chains. "Most manufacturers are trying to manage stock quantities at their warehouses. The next level is to watch movement at the retail store, as products could just be sitting on the shelf," she said.

Looking 10 to 15 years ahead, Lopker predicted that retailers will eventually monitor how goods are being used in the home. "Tags will be able to tell you what is being consumed from the fridge," she said. "You can see preferences at a particular season or time."

Lopker noted that some drinks dispensers already connect to distributors, so delivery trucks can be loaded with exactly the right amount of cans. "If we had this capability in people's homes, supermarkets could get the products to the shelves just on time," she added.

But it is not only retailers who see advantages in wireless tagging. The Vatican is using RFID technology to manage its library of two million books and manuscripts. For this project, an RFID tag has been attached to every book and manuscript, enabling staff to quickly identify items by passing a reader along shelves. The Vatican library previously had to close for a month every year to check inventory - using the RFID system, the task has been reduced to half a day.

To help organisations with RFID projects, certain vendors are offering services to plan and implement rollouts. BT and Deloitte & Touche recently announced a joint RFID infrastructure implementation service to help organisations keep down costs and comply with RFID mandates from retailers such as Wal-Mart and Tesco.

However, security and privacy may be issues for some deployments. Security specialist RSA offers an RFID risk-assessment service and Blocker Tags, which can jam RFID readers to ensure data stored on tags is protected from unauthorised parties.

Mike Neuenschwander, senior analyst at research firm Burton Group, said RFID security is becoming more important as the data contained on the chips becomes more valuable. "The US is requiring its closest neighbours to place biometric information on passports and include the information in an RFID tag," he said.

As the information on the tags will be encrypted, software at each border crossing will need access to the appropriate keys - a potential management headache, according to Neuenschwander.

He added that Wal-Mart and other retailers have decided to restrict RFID tags on the shopfloor because of concerns about privacy and about linking consumer information to products.

However, QAD's Lopker noted that there had been concerns over privacy in connection with supermarket loyalty cards, and these qualms had been overcome. She predicted that RFID would follow the same pattern. "Everyone has their price, and people will sign up [to allow use of RFID] if the offer's right," she argued.

Lopker offered the example of fridges already available that take an inventory of their contents. "Users can program in trigger points for items running low and receive alerts to restock. Or this list could be sent directly to your local store."