RFID uses radio waves to automatically identify objects. There are two main components: tags, which attach to objects, and readers, which detect tag signals. Tags can be passive, powered by reader signals, or active with an internal battery. RFID is used in manufacturing and retail to track inventory from factories to store shelves. Tags on pallets and packages are scanned at each stage to update inventory systems in real-time. This improves visibility across the supply chain and helps retailers keep optimal stock levels. However, RFID tags can be more expensive than alternatives like barcodes.