It’s a Wal-Mart executive’s dream: an inventory system that knows just how many cans of chicken soup are sitting on the shelves and provides a real-time picture of when they arrive from the factory and depart in shoppers’ baskets. The first field test of such a system is about to begin.

The likely test bed: a retail warehouse in Tulsa, OK. The technology: tiny versions of the toll-paying “radio tags” found on many car windshields. This October, researchers from MIT’s Auto-ID Center will affix these tags to forklift-sized pallets of products. Tag readers on warehouse shelves will log the movements of arriving and departing pallets; this information will be relayed via the Internet to retail headquarters and manufacturers (see “Beyond the Bar Code,” TR March 2001).

Sponsored by major retailers and manufacturers, the test will extend to tracking individual cans and boxes by next April. This move will be enabled by a new breed of tag costing just pennies each. These new tags, now being prototyped at MIT, will exploit some of the smallest silicon chips ever used.

The potential payoff: a level of inventory monitoring not possible with today’s bar code technology, which tracks the movements of product types, not individual items. Bar codes save businesses billions every year; wireless alternatives may save billions more by boosting efficiency and reducing theft, oversupplies and shortages, says David Weil, a professor of economics at Boston University.