Walgreens is deploying radio frequency identification technology to track products inside distribution centers that serve thousands of stores. While it's nothing like the massive RFID-based supply chain strategy once envisioned by another giant retailer -- Wal-Mart -- it demonstrates how RFID is starting to play an important role in some areas of retail.

Walgreens and its RFID systems integrator and software supplier, Blue Vector, announced Tuesday that the drug-store chain has tagged 170,000 assets at a South Carolina distribution center, primarily the plastic tubs and cages that carry cases of products to shipping dock doors. As containers pass by readers, information about the contents is synced with Walgreens' warehouse system to ensure that product quantities are accurate, that they're at the correct dock door, and that products are being put on the right trucks and in the correct order for unloading. Employees are alerted to errors via monitors near dock doors.

The system keeps Walgreens from spending time and money handling products shipped to the wrong store, and it eliminates paperwork and bar-code scanning from the loading process, said John Beans, VP of Blue Vector, in an interview. Walgreens said in a statement that it's an effort to "revolutionize" the company's distribution center systems and processes "to drive significantly higher efficiency, accuracy, and ultimately higher margins."

Walgreens began implementing the system at a Connecticut distribution center and plans to outfit four more out of its 15 U.S. distribution centers, Blue Vector CEO Mike Gardner said in an interview.

The implementation shows the retail industry's growing acceptance of RFID. But, as is the case with Wal-Mart, so far the interest is mostly focused on distribution centers. Wal-Mart initially planned to have most of its suppliers tagging cases of goods with RFID and using the technology widely in retail stores, but it has scaled back those plans in the past few years.

Despite some suppliers' reluctance to invest in RFID technology, at least one of Wal-Mart's midsize suppliers, Pacific Coast Producers, has seen a tremendous return on its investment. You can learn more about their story by downloading an InformationWeek Report here (registration required).