How to Build an RFID Tool Tracking System

If you want to keep a record of the location and condition of your tools, an RFID tool tracking system is an excellent solution and a common asset tracking application. While transitioning from a manual reporting or spreadsheet-based system, companies often find it more manageable to implement barcoding solutions before delving into RFID technology.However, for those already accustomed to barcoding but eager to advance their tracking capabilities, exploring RFID becomes a logical progression. With an RFID tool tracking system, you can take preventative maintenance measures, extend the lifecycle of your equipment, and prevent theft.

This article explains what an RFID tool tracking system is, why it’s so beneficial, and how you can build your own system. Let's begin if you’re ready to throw out manual reporting and complicated spreadsheets in favor of a digital solution.

What is RFID tool tracking? 

RFID tool tracking lets you get a complete view of your business’ equipment at once. It’s a monitoring system that uses radio frequency identification tags (hence the name, RFID) to track your tools and other assets instantly. 

It’s incredibly commonplace, too. Many industries, including construction, healthcare, education, and manufacturing, use RFID tags and readers to keep track of tools and equipment. No wonder the global market for RFID tags is expected to hit $15.72 billion by 2027, up from $11.46 billion in 2023. 

RFID tool tracking is reasonably easy to implement, and the financial investment, while not insignificant, often pales in comparison to the value that such a solution provides. RFID tags can be placed on almost any asset, with data transferred via RFID readers and scanners to an asset management software — allowing employees to access and edit information whenever and wherever they like. 

Typically, businesses use RFID tags to track the location of physical assets like tools. However, superior RFID systems, ones that incorporate asset tracking software, can also store information about the condition of assets to streamline maintenance processes and extend the lifecycle of tools.

Why you need to keep track of tools

Businesses deploy tool-tracking systems to mission-critical environments for plenty of reasons. 

Manual methods of keeping track of who has what tool are inefficient. Using a ledger or spreadsheet is slow, inefficient, and increases the risk of fraud. But with RFID tracking, you know exactly when each tool was removed from the area without employees having to write anything down. Your team’s time can be spent on more important revenue-generating activities. 

RFID tags are an excellent way to prevent theft. The cost of equipment theft is staggering. In the construction industry, for instance, it’s been estimated to be between $300,000 and $1 million. Real-time tracking and notifications powered by RFID tags make it less likely that this kind of theft will be attempted, let alone be successful. 

They also help your business stay compliant. By quickly finding and identifying every asset and tool, you can ensure regulatory compliance across almost any industry while simplifying your auditing process and improving record keeping. 

Tool tracking makes it easy to carry out preventative maintenance on your equipment. Every tool is at risk of breaking or malfunctioning, but you can stay ahead of the curve by using data from an asset tracking solution. For example, your asset tracking tool may highlight that a particular tool is being used at twice the recommended rate. You can use this data to carry out proactive inspections (and repairs if necessary) to keep an important tool in circulation. 

Each tool’s lifecycle is likely to increase thanks to a reduction in theft and an increase in preventative maintenance. This, along with the time-saving benefits that an RFID tool tracking system offers compared to manual solutions, can bring significant financial benefits — far beyond the cost of implementing such a system. What’s more, the data you gather can be used to guide future tool-related decisions, such as when to buy a new tool and what specific brand of tool to purchase.  

When does an RFID-based solution make sense?

There are several methods you could use to track your tools. Barcodes and QR codes are two of the most popular alternatives — and ones we regularly recommend companies use in their first asset tracking system. 

Barcodes are an excellent choice for many asset tracking use cases since they are cheap and easy to implement. But, sometimes companies are ready to move on to RFID-based tracking solution instead.


RFID tags are incredibly easy to scan. You can use RFID tags to scan several assets simultaneously without being close to them. These tags can be scanned passively as assets pass a scanner, or if you choose active RFID tags, there’s no need to scan them. These devices have a built-in battery, which means they continuously transmit data.  

RFID tags are also incredibly durable, making them an excellent choice for tools like heavy machinery stored outdoors. Because the tags can be rewritten, they are also a great choice for companies that replace tools and equipment regularly.

Finally, your data requirements may necessitate the use of RFID tags. Most RFID tags can store between 128 bits and 256 bits of data, which is considerably more than some other solutions.  

How to build an RFID tool tracking solution

An effective RFID tool tracking solution contains three core parts: the tags, a scanning solution or handheld reader, and asset tracking software to keep everything organized. Let’s take a look at each element in more detail below. 

RFID tags

There are three types of RFID asset tags: active, passive, and semi-passive. 

Active RFID tags come with their own power source, usually a battery, which continuously transmits a signal. They can transmit data over about 150 meters or 500 feet. 

Passive RFID tags don’t have an internal power source. Instead, they transmit data using antennas and RFID readers. This means the range is shorter (usually about 10 meters), but these tags tend to be cheaper and easier to maintain. These are the most commonly used tags in a tool tracking system.

Semi-passive RFID tags use a combination of active and passive technology. They have both an internal battery and an antenna and RFID chip. You get the best of both worlds here. The signal range is lower than an active tag, but you get real-time monitoring. 

The cost of implementing RFID tags will depend on your type of tag. Passive tags are significantly cheaper than active ones since they have no power source. Passive tags can cost around $1 each, but active tags can cost upwards of $50 per tag. 

Active tags are easier to install, and you’ll probably be able to do this yourself. Passive tags are a little more complicated because they rely on readers and need to be connected to a server. This usually requires the help of an installer to set up the system and run tests. 

Handheld readers and scanners

Depending on the type of tag you choose, you’ll need a set of handheld readers or fixed scanners. You can have both a fixed and handheld system, but most businesses choose one or the other. 

With a fixed RFID tracking system, readers are usually placed at all entrances and exits and will scan tags as they move past. You can have scanners continuously reading all tags in an area or at regular intervals, but this is more intensive and less common. A fixed system will update your system whenever an asset is removed or returned to the area. This creates a digital accountability log that records when an asset was removed.

A handheld RFID system works a little differently. With this system, you’ll need to purchase one or more handheld readers that employees will use to manually scan tags. This should happen at regular intervals (at the end of every day), but it could also happen after milestones like the start or end of a job. 

A handheld system is more labor-intensive than a fixed system, but it does let employees create more detailed notes about the location and condition of each tool.  

Asset tracking software

No RFID tool tracking solution is complete without a piece of comprehensive asset tracking software. Asset tracking software is a scalable digital platform that manages all of the information and data conveyed by RFID tags. 

Employees can use asset tracking software to get full visibility into your tools, track who has which tool and who used it last, see which tools need maintenance, and do dozens of other tasks. 

You’ll want to choose asset tracking software with the right features for your business. For example, having multiple users with tiered access abilities will make it easy to align your entire team while ensuring only a few authorized users have administrative capabilities. 

Choosing a cloud-based solution will also be imperative. If you want to encourage your team to access data from anywhere — whether that’s the office or out in the field — then choosing a cloud-based solution that can be accessed from any device is key. Bonus points if the software has offline capabilities that let users access and edit information without an internet connection. 

Configurable reporting functionality should also be high on your list of ideal features. Great reporting allows you to break down and visualize data by categories like location, tool type, and employee. The more granular the reports, the easier it will be to use data to make informed decisions. 

Solve your tool tracking problems with RedBeam

RFID tool tracking is a powerful solution for any business looking to get better visibility into tool use and location, lengthen the life cycle of tools, and meet regulatory standards. Active, passive, or semi-passive RFID tags are all suitable solutions. However, choosing a suitable asset tracking software is arguably the most important decision when building an RFID tool tracking system. For that, look no further than RedBeam. 

RedBeam offers an easy-to-use, comprehensive asset management solution that works with your chosen RFID tags and readers to let you document, edit, and report on tool data at scale. You can design the system to fit your business’s specific needs. Custom field functionality means you can create as many personalized asset records as you wish and track whichever details matter most. Role-based access means supervisors and managers can access all of your data while limiting other employees to specific tasks. You can even integrate your asset management system with the rest of your technology stack using RedBeam’s REST API.

RedBeam also offers all of the features your team needs to build an effective RFID tool tracking system. That includes a web-based portal, so employees can access the platform’s data wherever they are; a mobile app, so employees can use their smartphones to access data; and incredibly strong security standards that keep all your data secure. 

Start a 30-day free trial and experience scalable RFID tool tracking today.