The secret to taming supply chains may be computer chips no bigger than a grain of sand. Radio frequency identification (RFID) tags identify a product, as a bar code does. But the mini-chips can transmit the information they carry by radio signal, eliminating the need for manual scanning and ultimately making it easier to access information about the product.

The potential for the tags was underscored in June when Wal-Mart Stores Inc. said that it would require its top 100 suppliers to start using them by 2005. "Wethink that by using it at the pallet and case level, we can streamline and improve inventory count, [achieve] faster shipping and receiving and improve quality inspections at the [distribution center]," said Tom Williams, a spokesman for Wal-Mart. Wal-Mart said that its big suppliers must start tagging the pallets they deliver to its distribution centers by January 2005 and the cases on those pallets by January 2006.

RFID tags will become "a standard part of most large companies' supply chains," predicts Christopher Boone, an analyst and program manager for retailer research at IDC in Framingham, Mass. But because manufacturers and retailers will have to make big investments to adopt the new technology, "it's not really going to take off in any sizable way until Wal-Mart forces the issue," Boone adds–as the big-box retailer obviously is doing.

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