Half of UK suppliers and manufacturers are considering deployment of controversial radio frequency identification (RFID) schemes in a bid to improve supply chain efficiency.

According to a report by Datamonitor and e.center, the next 18 to 24 months will see a "substantial growth" in the use of RFID technologies.

But it warned that "a variety of privacy issues" will need to be overcome, such as tracking the consumer and their purchases.

The study, The Future of EDI: Trends in electronic communication, said: "Efficiency gains are not the only benefits that can be achieved; cost savings through reduced errors [and] wastage can also be experienced.

"However, significant investment will also be required upfront before the long-term benefits can be realised."

Its research reflects conclusions drawn from a Forrester report, also released last week, which found that retailers should use RFID tags to minimise product recalls and to track health issues. Tony Hart, enterprise applications managing analyst at Datamonitor, added in a statement: "There are many dangers ahead if organisations within the supply chain fail to collaborate.

"The increase in collaborative techniques will help organisations get the right product to the right location, at the right time and at the right price. This is crucial in ensuring consumer loyalty in today's competitive market."

Datamonitor found that 80 per cent of suppliers and over 60 per cent of manufacturers and retailers rely on paper-based manual processes with unstructured formats, such as email and fax, for business-to-business communication.