RFID tags are a foundational technology for modern tracking and identification systems. Used across industries—from retail and manufacturing to logistics and healthcare—these small electronic devices enable automatic data capture without manual scans or line-of-sight requirements. By transmitting information via radio waves, RFID tags help organizations improve accuracy, streamline operations, and reduce costs as supply chains and facilities become more connected.
In this article, we’ll explain what RFID tags are, how they work, and why they’ve become such an important tool for tracking items and optimizing operational workflows.
What is an RFID Tag?
An RFID tag is a compact electronic device designed to identify and track objects wirelessly. Each tag contains a microchip that stores data and an antenna that communicates with an RFID reader using radio frequency signals. When a tag enters the reader’s range, it transmits its stored information, allowing systems to identify or track the tagged item automatically.
RFID tags generally fall into two categories: passive and active. Passive RFID tags do not contain a power source and rely on energy emitted by the reader to transmit data. They are typically smaller, lower cost, and well suited for high-volume tracking applications.
Active RFID tags include a built-in power source, enabling longer read ranges and more frequent data transmission, which makes them ideal for tracking high-value or highly mobile assets.
| Feature | Passive RFID | Active RFID |
|---|---|---|
| Power Source | No internal power, relies on the reader’s signal to power the tag | Internal battery |
| Read Range | Typically shorter read range (usually less than 10 meters) | Longer read range (can reach up to 100 meters or more) |
| Cost | Generally lower cost per tag | Higher cost per tag due to the battery |
| Data Capacity | Limited data capacity | Can store more data |
| Read Speed | Slower read speed | Faster read speed |
| Applications | Inventory management, access control, asset tracking | Real-time location systems (RTLS), supply chain management, animal tracking |
| Advantages | Lower cost, longer battery life (due to lack of internal power) | Longer read range, faster read speed, can store more data |
| Disadvantages | Shorter read range, slower read speed, limited data capacity | Higher cost, shorter battery life (compared to passive tags) |
Understanding RFID Technology
An RFID system consists of three core components: RFID tags, RFID readers, and antennas. Readers emit radio signals through antennas to detect nearby tags. When a tag responds, the reader captures its data and sends it to backend software for processing and analysis.
This setup allows organizations to identify, track, and monitor items automatically as they move through facilities, dock doors, workstations, or storage zones. By eliminating manual scanning and data entry, RFID systems provide faster, more reliable visibility into inventory, assets, and workflows—making them a powerful alternative to traditional barcode-based tracking.
The Role of RFID in Tracking and Efficiency
RFID technology continues to expand rapidly as organizations seek better visibility and control across operations. The global RFID market hit $17 billion in 2024 and will grow to more than $46 billion by 2034, reflecting rising demand for real-time tracking, automation, and supply chain transparency.
One major reason for this growth is RFID’s impact on inventory accuracy and operational efficiency. Studies show that RFID can significantly increase inventory accuracy—often achieving 95 % or higher—while reducing human error and enabling proactive stock control.
Across industries, RFID helps organizations track products and assets continuously, streamline manual processes, and improve decision-making with real-time data—making it a key driver of both tracking performance and overall operational efficiency.
RFID in Retail Manufacturing
In early 2022, Walmart announced the expansion of its RFID mandate program to additional products and departments. The retail giant is mandating its suppliers to tag home goods, sporting goods, electronics, and toys with RFID.
The company reported that RFID technology helped reduce out-of-stock items by up to 16% and improved inventory accuracy to over 95%. These improvements resulted in significant cost savings and a better shopping experience for customers.
Walmart RFID tag and supply chain standard guide
And it’s not just Walmart. Retail brands including Target, Nordstrom, Lowe’s, Macy’s, and Kohl’s all have rolled out RFID tag mandates.
Other Industries
In addition to inventory management, RFID tags are also used to track assets in industries such as healthcare, logistics, and manufacturing. For example, hospitals use RFID tags to track medical equipment, ensuring that critical devices are always available when needed.
Similarly, logistics companies use RFID to track shipments, reducing the likelihood of lost or misplaced packages.
Example of passive RFID tags
Use Cases of RFID Tags
RFID tags support a wide range of use cases across industries by enabling fast, accurate, and automated identification. Because they do not require line-of-sight scanning and can be read in bulk, RFID tags are especially effective in environments where items move frequently and manual tracking creates delays or errors.
Common RFID tag use cases include:
- Inventory tracking to maintain accurate stock levels and reduce shrinkage
- Asset management for tools, equipment, and high-value items
- Work-in-process (WIP) tracking to monitor materials as they move through production
- Supply chain and logistics to track pallets, cartons, and shipments
- Retail operations for item-level inventory accuracy and loss prevention
- Healthcare to locate medical equipment, supplies, and patient assets
- Access control and security using RFID badges or credentials
- Returnable container and bin tracking to reduce loss and improve utilization
By automating identification and capturing data in real time, RFID tags help organizations improve visibility, reduce labor, and make better operational decisions across the entire lifecycle of an item or asset.
2026 RFID Integration Guide
A complete guide that will help retail brand owners, manufacturers, and distributors reap great benefits from integrating RFID into their supply chain.
Challenges and Future of RFID Technology
Despite its numerous advantages, RFID technology does face some challenges. One of the primary concerns is the cost of implementation, especially for small businesses. While the price of RFID tags has decreased over the years, the cost of RFID readers, software, and integration can still be prohibitive for some companies.
However, the future of RFID technology looks promising. As the technology continues to evolve, we can expect further reductions in cost, making RFID more accessible to a broader range of businesses
The integration of RFID with other technologies, such as the Internet of Things (IoT) and blockchain, will also enhance its capabilities, enabling even more efficient and secure tracking systems.
Interested in RFID?
An RFID tracking system can help organizations of all sizes improve their supply chain efficiency. Contact the CYBRA team to schedule a demo today.