updated 5/5/2004 9:44:26 PM ET 2004-05-06T01:44:26

Sun Microsystems Inc. is opening a Dallas-area facility on Wednesday to test radio tags for tracking consumer products and improving inventory control in stores.

Sun is trying to help manufacturers who must meet a deadline set by Wal-Mart Stores Inc., the world's largest retailer, to use the tracking technology in pallet shipments by January.

Wal-Mart and other retailers believe that radio frequency information, or RFID, technology could replace bar codes and help them improve control of their inventory, cut costs and reduce theft.

At the 17,000-square-foot warehouse that Sun is leasing in suburban Carrollton, manufacturers such as Gillette Co. will load pallets of actual products in their packaging and run them through mock-ups of loading docks.

Technicians will test whether RFID tags in the pallets -- and eventually on individual items -- can be read by systems that Wal-Mart and other retailers will use, said Larry Singer, Sun's senior vice president of global markets. Sun will give manufacturers a stamp of approval if their shipments can be tracked successfully by the stores, he said.

Sun's technology partners in the venture include Nortel Networks, Texas Instruments Inc. and i2 Technologies Inc.

Santa Clara, Calif.-based Sun expects to open a similar facility in Scotland in the next few months.

Experts believe that the tags could be cheap enough to be placed on individual products within about five years.

David Syzmanski, director of a retailing center at Texas A&M University, said retailers are waiting to see Wal-Mart's results before deciding whether to also require vendors to put tags on shipments.

"There will be a lot of bugs to work out," he said.

Last week, Wal-Mart began testing RFID at a distribution facility and seven supercenters in the Dallas area. Eight suppliers are attaching the tags to shipments of 21 consumer products.

Sun picked the Dallas area for its U.S. test center partly because of the proximity to Wal-Mart headquarters in Bentonville, Ark.

Other retailers, including Target and Albertsons, are also talking to suppliers about using RFID technology.

The prospect of putting radio tags on individual items has raised alarms among privacy advocates, who warn they could be used to gather information about consumers who buy the items and take them home.

"There will be some push-back," Syzmanski said. "Are we going to track consumers the rest of their lives?"

A Wal-Mart spokesman said the company won't use the technology to track consumer behavior.

The radio tags contain a chip that identifies a product or pallet shipment. At stores, instead of an employee using a handheld device to scan bar codes on incoming shipments, a radio signal will tell a computer when products arrive.

"So much of the supply-chain process is still manual," Sun's Singer said. "When the products themselves can communicate as to shelf life and inventory control, you're going to see much greater efficiency in the system."

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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