How to Use RFID Inventory Tracking

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In select Seattle sports stadium retail stores, you can now pick items from the shelf, exit the front door, and seamlessly get charged the accurate amount—without needing cash registers, checkout lines, or surveillance cameras. The secret behind this streamlined process: RFID technology.

RFID, which stands for radio frequency identification, is increasingly used to manage inventory, monitor supply chains, and facilitate frictionless checkout experiences. While Amazon provides the RFID tech for ​​Seattle sports stadiums via its Just Walk Out platform, it’s just one of many RFID vendors. Here’s a primer on leveraging RFID technology to boost overall operational efficiency across your retail business.

What is RFID inventory tracking?

Radio frequency identification (RFID) inventory tracking and management is a system that uses radio waves to transmit data from RFID tags to RFID readers, which process the information from the tags to update inventory databases.

You can apply an RFID inventory management system across your business operations, including real-time inventory tracking, supply chain management, and instant checkout in retail stores. An RFID inventory system can even replace cashiers and warehouse operators, leading to reduced labor costs without sacrificing inventory accuracy.

There are two kinds of RFID systems: passive RFID and active RFID. An active RFID system uses tags that continuously broadcasts signals using its own power source. Passive RFID tags don’t have an internal power source—instead, they’re powered by a reader’s electromagnetic field when they’re in range. Both systems can be useful in RFID inventory management.

How does RFID inventory management work?

Here’s how an RFID inventory management system typically works:

1. Each item receives an RFID tag

This occurs at manufacturing plants or when an item enters a company’s supply chain. These tags contain a unique identifier and potentially other relevant information about the item, such as its type, serial number, or manufacturing date. Some items receive multiple tags to enable more sophisticated tracking.

2. RFID readers scan information from tags

Businesses install RFID readers at specific locations within buildings and vehicles, including at doors, and checkpoints, and in storage areas. These readers emit ultra-high-frequency radio waves and capture the data from the RFID tags when an item with a tag passes within range.

3. Readers transmit data to computers

When a reader captures information from RFID labels, it sends the inventory data to a computer network known as a central inventory management system.

4. The system syncs the data

The central inventory management system sends real-time data to all machines on its network, providing the latest information about an item’s location.

5. Data is tracked across the inventory management process

Thanks to the RFID system, humans and computers alike can track each item’s real-time location, quantity, and sales status. This form of robust data collection lets companies monitor inventory levels, move items to where they’re needed (such as stores or distribution centers), and replenish their supply chains.

Passive vs. active RFID: What’s the difference?

Passive RFID and active RFID differ in their use of electrical power within RFID systems. Here’s a comparison of the two technologies.

Power source

  • How they’re similar: Both passive RFID and active RFID require electromagnetic currents.
  • How they’re different: Passive RFID tags are powered by the reader’s electromagnetic field during data transmission, making them lighter and less expensive. Active RFID tags have their power source, such as a battery, allowing them to broadcast signals independently. This provides a more extended read range and continuous data transmission.

Data transmission

  • How they’re similar: Both passive and active RFID systems enable real-time tracking through communication between RFID tags and readers.
  • How they’re different: Passive tags only transmit data when the tag is within an RFID reader’s electromagnetic field. Active tags share data at regular intervals, meaning distant readers can track them.


  • How they’re similar: Passive and active RFID systems require functioning tags, readers, and software. If readers stop working or software becomes outdated, the system can no longer track inventory.
  • How they’re different: Passive RFID tags potentially can last for decades, as there are no internal batteries that can expire. The lifespan of their batteries limits active tags. Some of these batteries can be replaced; other active tags must be discarded when their batteries die.


  • How they’re similar: Both passive and active RFID systems require investing in readers and computer software, which can cost anywhere from a few hundred to a few million dollars, depending on the breadth of your infrastructure, operations, and inventory management processes.
  • How they’re different: Passive RFID tags cost pennies, whereas active tags often start around $25 and can cost far more depending on their features. This makes active RFID systems more expensive than passive systems.

What are the benefits of RFID inventory management?

An RFID inventory management system can provide myriad benefits to businesses that need a firm handle on their inventory counts. These include:

Full inventory visibility

Whether it’s in a factory, a ship, a truck, a warehouse, or a retail store, with an RFID system, inventory can be monitored and tracked, no matter where it is. 

Tracking inventory levels in real time

An RFID system instantly updates product databases, letting your team track inventory in real time. You don’t have to wait for daily or weekly inventory reports.

More accurate data

When it comes to asset tracking, automated RFID tracking can be more precise than manual inventory checks. At each stage of a product’s journey, readers scan it and update its location, vastly reducing the potential for user error.

Smooth implementation process

Adding RFID checkpoints to an existing factory, retail store, or warehouse environment is relatively easy. The scanners can also integrate with your company’s existing systems, whether that’s an inventory management software, an enterprise resource planning (ERP) system, or a point-of-sale system.

Cost savings

Not only can RFID systems provide greater data accuracy than humans scanning QR codes or bar code labels, they can also cost less in the long run. Initial implementation may cost thousands of dollars, but once you’re past the upfront expenses, RFID systems can stay operational for years.

Loss prevention and security

RFID tags help prevent retail shrink, including losses from shoplifting. Active RFID tags can track stolen products after they leave the store. This can help law enforcement apprehend criminals and help your business recover valuable merchandise.

Improved customer experiences

RFID can improve customer service by ensuring product availability, accurate orders, and faster checkout processes. In some cases, RFID systems allow customers to purchase items from a retail store without even visiting a checkout counter. In these instances, RFID systems track the merchandise people select from shelves. Using the data collected from these systems—the type and quantity of items taken—the store can then bill the customer’s credit or debit card. This streamlined experience can promote overall customer satisfaction.

Take the guesswork out of restocks

Only Shopify helps you make smarter inventory purchasing decisions. See your most profitable and popular items, forecast demand, get low stock alerts, and create purchase orders without leaving your POS system.

What are the limitations of RFID inventory management?

Implementing RFID inventory management requires careful planning, collaboration with experienced RFID vendors, and a company culture that welcomes change and innovation in the name of business growth. 

Here are some of the challenges to consider when switching to an RFID system:

Upfront costs

It can cost a lot of money to implement an RFID system. Expenses include RFID tags, readers, software, and training. In an active RFID tag system, you can sometimes spend tens, if not hundreds, of dollars for a single tag. You can conduct a cost-benefit analysis to see if an RFID system is worth the cost for your business.

Data accuracy concerns

If multiple readers pick up a signal from the same RFID tag at once, the result is known as a tag collision and can lead to potential reading errors. This is typically only an issue with longer-range systems. RFID vendors may offer anti-collision algorithms to address this issue.

Data security and privacy

Businesses handling sensitive data may have concerns about the security and privacy of RFID data stored in their systems. Proper security measures, including encryption and access controls, must be in place to mitigate potential risks. You may also want to ask your RFID vendor about how and when tracking is turned off.

Tag interference and range limitations

RFID tags, particularly passive tags, can only transmit data when in range of a reader. Radio frequency interference from metals, liquids, or other materials can affect the read range and accuracy of RFID tags. Make sure to set up readers where the signal will not be blocked and extends over the entire area you wish to cover.

Staff training and change management

Employees need proper training to understand and effectively use RFID technology. Resistance to change and lack of training can impede the successful adoption and use of the RFID system. Implementation may be a sensitive topic among employees who see their work potentially replaced by automated systems.

RFID inventory tracking FAQ

What is the difference between bar code and RFID inventory management?

Bar codes, and their close cousins, QR codes, must be manually scanned to transmit information. RFID readers automatically scan tags that align with their programmed radio frequency.

How accurate is RFID inventory?

RFID systems can achieve near-perfect read accuracy when tags are placed correctly, and the RFID readers are positioned optimally. Proper tag placement and reader calibration are crucial to ensure reliable data capture.

How much does implementing an RFID inventory management system cost?

The cost of implementing an RFID inventory management system varies widely based on the implementation’s scale, the RFID solution’s complexity, the required features, and the business’s specific needs. Contact an RFID vendor for custom price quotes.

Is RFID tracking suitable for businesses of all sizes?

RFID tracking is most suitable for businesses that can absorb significant upfront implementation charges and must track merchandise at different points along the supply and delivery chain. Small, single-location stores and DTC ecommerce retailers may need help finding RFID systems worth the price.

What are the primary industries that benefit from RFID inventory tracking?

Industries that benefit from RFID inventory tracking include apparel, pharmaceuticals, automotive, aerospace, food and beverage, and logistics. These industries tend to have many types of products circulating through complex supply and distribution chains.