RFID technology (Radio Frequency Identification) works by using electromagnetic fields to automatically identify and track tags attached to objects. An RFID system consists of tags, readers, and an antenna. The tag contains a microchip and antenna that transmit stored information when activated by a reader's radio signal. This allows real-time tracking of inventory with minimal human intervention, improving efficiency in sectors like logistics and retail. As a result, businesses can manage stock levels more accurately and streamline operations, leading to cost savings and enhanced productivity.