In simpler times, Purdue Pharma might not have had these troubles. But these aren’t simple times.

The company makes the popular and addictive painkiller OxyContin, and not surprisingly, it’s a target for thieves and high-tech counterfeiters, both of which can intrude at vulnerable points in the supply chain.

Wal-Mart (NYSE: WMT) wanted to be able to track each individual bottle of the pills for internal-control purposes and to ensure its customers were getting what they paid for. The federal government was also looking for a way thwart counterfeiters and thieves.

Short of assigning a U.S. Marshal to physically follow the drugs through the supply chain, a solution was elusive.

Wal-Mart then decided to adopt a technology it had long used to great effect in its famously efficient distribution centers. It simply told Purdue to label each individual bottle of pills with an RFID tag. 

I’ve written within Investor Update about this technology. RFID is exactly the sort of game-changing product I’m always hunting for.

Light years ahead of barcodes
RFID is an acronym for “radio frequency identification.” The small tags emit a radio signal as they pass a scanner. This signal is pretty much the same as a barcode — a long number that can provide a ton of information. But unlike barcodes, you don’t have to scan them individually with a laser; you can use a radio receiver, which makes it much easier to scan items that are densely packed or are moving quickly.

The tags have been behind-the-scenes for a while. And now that they’ve proven they’re reliable, secure and much more robust than barcodes, their use is about to grow exponentially.
In fact, you’re already in contact with them, but likely don’t even know it.

RFID tags are used in your E-ZPass — the device tollbooth scanners read as you drive by and magically charge you. Some credit cards have the technology, allowing users to simply wave their card across a reader instead of handing a card to a cashier, swiping it through the scanner and then signing a receipt.

And all newly issued passports contain an RFID chip that can be used to cross-check the information printed in the passport for improved security.

Hundreds of practical, profitable applications
So what exactly is “game-changing” about RFID? In a word: everything. The technology has applications across nearly every industry. Consider the real-world examples of how RFID can have an impact:

• At a Boeing Co. (NYSE: BA) plant in Washington, it used to take two hours a day per employee to read and record all the barcodes from each shipment. And there was no guarantee of accuracy.

• Now Boeing puts RFID tags on these goods. They need one worker to monitor processes, the system is perfectly accurate, and the savings in labor costs alone paid for the hardware investment in just six months.

•  Airline passenger volume is projected to generate nearly 70 million lost bags a year by 2019, and each lost bag costs the airline about $130. That means in a few years lost baggage will be a $9.1 billion problem annually.
  
  Fitting bags with RFID tags would mean the bag can be “read” at dozens of points throughout the underbelly of an airport as they move from point to point, ensuring they are routed and loaded correctly.

• I’ve already mentioned Wal-Mart’s efforts to tag bottles with RFID chips, just as it tags pallets moving through its distribution centers. But beginning with jeans, the company is testing the technology, which can help a customer see if the jeans they want are in stock and literally where they are in the store.

And it sounds cliche, but those examples are just the tip of the iceberg…

Trust me, the profit opportunity in the RFID space is very real. When I first became interested in RFID stocks, I recommended a company that I thought had the edge in the industry. This company, called Smartrac, had created the first biodegradable RFID tags.

It turns out my research was right and Smartrac was certainly a game-changer. One Equity Partners LLC saw the value in the company and offered a 32% premium above where I had bought the shares a few weeks before. My Game-Changing Stocks readers and I took a nice gain, which wasn’t bad after only holding for a few weeks.
Even so, I was disappointed. I think the company ultimately would have been a 10-bagger.

Action to Take–> The good news is there is still plenty of potential in the space, including players like Zebra Technologies (Nasdaq: ZBRA) and STMicroelectronics (NYSE: STM). And there is no doubt the entire sector is still in the early stages of long-term adoption.

P.S. — RFID is big, and if you’re looking for more game-changing ideas, I just released a video you don’t want to miss. From tiny nuclear power plants that can be buried in your lawn, to revolutionary pain killers made from cobra venom, these game-changing ideas could take off in 2011. To get briefed on these opportunities, and several others, watch this video.