Nearly every day, Donald Carnahan and his clients profit from someone else's mistakes. One recent Monday, he was smiling at a pile of checks worth about $15,000.
Mr. Carnahan is president and owner of Associated Traffic Services, a Covina, Calif.-based firm that audits freight bills and provides consulting services to big and small businesses.
He and his staff of nine review about 40,000 freight bills a month, usually finding some kind of mistake on each one. And, when they do, his firm earns half of the money they collect from trucking companies.
"Most mistakes are made unintentionally at the billing office," said Mr. Carnahan, who bought the business from his employer in 1983.
Freight transportation experts say business owners lose millions of dollars a year because they don't put a high priority on their shipping and receiving operations. These departments are usually staffed by poorly trained and paid workers. Yet, if you think about it, your freight carrier is an extension of your business and can ruin relations with your customers if shipments are late, damaged or missing.
Gene Constant, a Chatsworth, Calif.-based management consultant who specializes in helping companies cut costs, said smart business owners should make sure they are getting both competitive rates and good service from their carriers.
Although the trucking industry was deregulated in 1980, trucking companies still must file every rate they offer to customers with the Interstate Commerce Commission. You should make sure your carrier files the correct rates, because if the trucking firm makes a mistake and undercharges you, it can come back later and ask for more money.
"But price should not be the only consideration," Mr. Constant said. Here are some additional tips:
* Before signing a contract with any freight company, find out whether they transfer your shipment to another carrier or deliver your goods themselves.
* Ask whether they can track the whereabouts of your shipment at all times.
* Find out how quickly they respond to complaints or claims filed against them.
* Finally, make sure they are financially stable, because hundreds of trucking firms have folded in recent years, leaving business owners in the lurch.
"The trucking industry is so competitive that any company that is not getting at least a 50 percent discount is paying too much," said Associated Traffic's Mr. Carnahan. "It's a buyer's market."
Mike Gamel, owner and president of Industrial Freight System in Sun Valley, Calif., recommends business owners hire a knowledgeable transportation person and make that person responsible for both outbound and inbound shipments.
"Companies will require a vice president to sign a check for over $50, but the guy or girl in the back can sign for a half-million dollars' worth of raw material," said Mr. Gamel, whose firm is one of California's largest trucking companies.
He said businesses too small to have a full-time transportation person should consider hiring an outside contractor to provide PTC the service. Mr. Gamel said business owners create many shipping problems themselves by not packing and labeling their products properly.
"Ninety-eight percent of actual freight claims start at point of origin because the cartons are marked incorrectly," Mr. Gamel said.
Sta-Lube, a Rancho Dominguez, Calif., petrochemical products maker, is one of several small businesses relying on Mr. Carnahan to keep track of its freight expenses.
"We ship 25 million pounds of product a year, the majority by truck," said Judi Proetel, director of operations for Sta-Lube, which sells to auto parts stores around the country. She said Mr. Carnahan not only audits Sta-Lube's freight bills on a quarterly basis, but two years ago saved the company thousands of dollars by fighting a claim filed by the trustees of a bankrupt trucking company.
"In one fell swoop he saved me $29,000, which more than made up for anything we've ever paid him."
Los Angeles Times Syndicate