Gillette is starting a mass trial of radio frequency identity (RFID) tags, which could see half a billion chips being used to track its products through the supply chain.

The 'smart' RFID tags can store information on a product, its place of manufacture and the raw materials used in production. They are read wirelessly, so they can be used to monitor products from manufacture to retailers' shelves.

Gillette said the tags, to be put on items such as razors, can cut theft in the supply chain and help retailers improve their stock control. Losses can cost up to four per cent of sales for retailers and manufacturers.

"Each year billions of dollars are lost by retailers and manufacturers through products being 'lost' in the supply chain," the company's director of external relations, Paul Fox, told vnunet.com.

"Between manufacture and getting to the shops it disappears in a multitude of ways."

Fox said the trials in the US and UK will be the third set involving RFID tags, following trials with tagged pallets and cartons of products.

This trial will see tagged products being stocked at Walmart stores in the US and retail outlets in the UK.

"We will carry this out through 2003 to see how robust the technology is," said Fox.

Eventually, sets of receivers along the supply chain could wirelessly monitor the chips, making it easy to pinpoint where stock is or whether it has been stolen.

"The tags are an enormous management tool throughout the supply chain. Barcodes are useless in the supply chain because they need human intervention," said Fox.

The tags will also be used with tests of 'smart' shelf technology in UK shops, which can monitor when stocks are low or in danger of being stolen.

One factor that held back the use of tags in the past was their relatively high cost, at about 80 cents. Developers have aimed for a cost of around 10 cents or less per tag.

Fox said Gillette had made a deal with Alien Technology to secure half a billion RFID tags. Low-cost tags are now a "reality", he said, but would not give further details.

The chief executive of Alien Technology, Stav Prodromou, said in a statement: "This is a landmark agreement that signals the commercial production of RFID tags at an affordable price."

In the UK, Woolworths is working on a trial of RFID tags in its supply chain and Marks & Spencer has expressed and interest in the technology.