Company Rolling Out Vending-Style Machines for Office Supplies
Office-supply hoarding,phenomenon so common it has become a recurring theme in “Dilbert”,may take a high-tech hit thanks to an Orange County entrepreneur who wants to push e-commerce beyond the computer screens and into supply cabinets.
DispenseSource, a five-person operation created last year by Jeff Chavez, is creating a line of vending-style machines that keep track of everything from Post-It notes to printer cartridges, a technology ultimately designed to save offices time and money.
The Rancho Santa Margarita company recently closed on $600,000 of seed funding and is seeking another $10 million to hire 25 more people and launch the product this year.
The units resemble vending machines, only instead of coin slots they have a panel of buttons to type in access codes that open certain drawers or panels and keep track of who is taking what. Companies that use the machines can restrict access by departments or individuals.
In addition to helping the purchasing manager by providing detailed usage information and even automatically ordering new supplies, the machines are designed to reduce waste by making employees more conscious about how much they’re using. And soon, the machines will allow business-supply retailers to sell directly into offices, restocking the units periodically instead of shipping each individual order.
“We’re not like another Pets.com,” says Chavez, referring to a flood of look-alike e-tailers entering the already crowded online sales arena. “We’re one of two companies anywhere doing this, and No. 3 is going to have a tough time getting in. It’s not about building another web site; it’s about building a whole new technology.”
And he knows No. 2 well. It’s his former employer, San Diego-based Pyxis Corp., a designer of similar machines used widely in the healthcare industry to dispense medication and medical supplies. It now operates as a unit of Cardinal Health Inc. of Dublin, Ohio.
Chavez, a 28-year-old father of three who skipped college, has already founded and sold another company, a medical-supply delivery outfit that led to his job with Pyxis.
He says he had thought of the idea of point-of-use vending systems for office supplies long before his time at Pyxis, but when the company decided to expand from its medical-supply roots into the office-supply business, it inspired him to enter the business on his own.
He recruited former Pyxis employee Robert Curtis, who provided much of DispenseSource’s startup capital, and called up OmniCell Technologies Corp. for the technology. Pyxis and OmniCell are fierce competitors.
“They were not pleased,” Chavez says, recalling his former employer’s reaction to his new company. “But they really should be glad we’re here. We’re going to stimulate this market, so I can’t imagine they’d be mad for too long.”
The market for office supplies in the U.S. exceeded $10 billion last year; it is estimated to be more than $200 billion worldwide.
Chavez hopes to take a piece of that by offering machines that limit access to certain supplies by department, generate usage reports and even reorder merchandise automatically over the Internet. Eventually, Chavez says, office supply stores will use the machines for instant-delivery e-commerce, providing the instant gratification of vending machines while charging buyers electronically.
Despite the potential criticism that the machines create an Orwellian atmosphere with such precise monitoring, Chavez insists that it simply ensures that supplies are available when employees need them.
The company plans to lease the machines to businesses for $150 per month and a small transaction fee that will depend on usage.
DispenseSource is finalizing designs and plans to start a formal marketing push in June. Company officials, meanwhile, are forging deals with office suppliers willing to subsidize the cost of the machines for the chance to sell supplies directly into offices that use them.
Initially, Chavez plans to target the financial, governmental, automotive and aerospace sectors, which typically have large offices and high supply use. Eventually, he hopes to install the machines in multi-tenant offices, selling supplies to different businesses inside.
“We lock them in with an old-commerce lease and then we’re there with the e-commerce piece,” he says.
The company has wooed several experienced executives to its board of advisors, including OmniCell chief executive Shelly Asher, former Xerox executive Mark Ramsiear, and Sasha Poljka, vice president of online health portal Medschool.com. n
