A recent Hackett Group study claims that Fortune 500 companies could save more than $10 million annually by off-shoring procurement to far-away lands like India.

According to the report, advances in technology now offer the transparency and controls to allow enterprises to monitor spend and transactional activities managed by a third-party outsourcer. Much of Hackett’s business case for outsourcing is built upon the labor arbitrage savings of offshoring procurement. The benchmarking firm estimates that offshore labor costs run 60% below stateside rates.

Hackett specifically recommends outsourcing of transactional activities — such as purchase order (PO) processing — and sourcing execution, estimating that moving these tasks offshore would help the average Fortune 500 company shave 275 procurement FTEs.

Argues report co-author Michel Janssen: “Today companies can turn to established off-shore resources that deliver labor cost reductions while maintaining or even improving the skill level of staff. The potential savings are simply too compelling to ignore.”

Are they? No doubt that many business process outsourcers (BPO) offer economies of scale and technology infrastructures that far exceed those accessible (or affordable) to most companies. And BPO’s in emerging markets like India, China, and Eastern Europe continue to offer considerably lower labor costs compared to more established economies. However, Hackett’s strong promotion to offshore procurement operations is somewhat misguided and even sensationalistic, possibly by design.

(Imagine if your CFO or CEO got ahold of the above stats and recommendations. As a supply management executive, you’d certainly need to defend your existence, let alone your initiatives to improve your organization.)

I do not dispute that procurement outsourcing can deliver significant efficiencies and cost benefits. I have witnessed first hand how orangizations outsourcing procurement have realized reduced supply and operational costs, and improve compliance, performance, and cycle times.

However, I do take issue with the lack of clarity offered as to how enterprises should outsource procurement. I also would warn against building a business case solely on labor arbitrage — especially considering the labor shortages cropping up in many offshore hot spots, such as India.

Having assessed the procurement outsourcing preferences and strategies of a number of companies in my day, I am well aware that the leading companies are incorporating outsourcing as a method to augment and accelerate their supply management transformation — not in lieu of creating a world-class capabilities. These firms are outsourcing to leverage economies of scale and improve execution and control of underperforming or non-core tasks and poorly managed spend categories. (I’ll withold comment as to whether these tasks are better performed in Omaha or Bangladesh.) This allows them to refocus their internal resources on high-value activities, such as strategic sourcing or supplier development.

For example, as noted in a previous Supply Excellence post, Sun Microsystems, which is widely viewed as a leader in supply management and the use of online sourcing methods, runs billions of dollars of online sourcing projects each year. Sun’s Worldwide Operations Group internally manages online negotiations and reverse auctions– what Sun calls “Dynamic Bidding Events” (DBEs) — for all its direct material and assembly purchases. Looking to drive similar volumes and benefits on its indirect side last year, Sun has augmented its internal Global Sourcing Services group capabilities for indirect goods and services with support from an Indian-based procurement service provider. The approach has added 20 additional resources to provide support for dynamic bidding events — all of whom Sun has trained in its standard dynamic bidding methods. Early returns indicate that the unorthodox approach is a success. Evidence: Sun sourced $1.7 billion of indirect goods and services via dynamic bidding in the first year of the program.

I have also witnessed how companies, wooed by many of the same labor and cost-benefits noted by Hackett above, have rushed to outsource underperforming procurement operations without giving any real thought to whether they had the processes, policies, and controls in place for effective procurement operations and ongoing governance. Just this week a senior supply management executive told me, “We eventually want to outsource our tactical and transactional procurement activities. But I won’t even consider that until we get our own financial shared services and [procurement] systems in place because I know [the outsourcing initiative] would be doomed to failure.”

Bottom-line: as with much in life, procurement outsourcing can be a valuable strategy when used in moderation.

Interesting side note: I was amused that the one point the report doesn’t address: if we’re outsourcing procurement to third-world regions, what do we need U.S.-based procurement advisory firms for? Maybe Hackett’s procurement advisory all stars Pierre Mitchell and Chris Sawchuck should brush up on their Hindi and Cantonese.

I’m excited to welcome an old cohort, Elizabeth Baatz to Supply Excellence. A true economist, Elizabeth was a regular contributor of pricing and supply indices and intelligence to Purchasing Magazine. Today, she and her husband, economic-whiz-kid Victor Malair, have created a proprietary forecasting model that uses multiple indicators to predict price and supply trends for numerous commodities and spend categories. Their pulse on supply markets — known as the ICE (Industry Cost Escalation) Alert — is used by hundreds of supply management teams to develop heding, sourcing, and supply management strategies.

Below, Elizabeth shares the first in what I hope will become a regular series on the top 10 commodities where supply managers can expect price increases in the coming months — and why. You can subscribe to the ICE Alert at www.ice-alert.com.

Negotiation hazard industries, which are under extreme margin pressure to raise prices, are numerous now. The table below shows the Top 10 manufacturing industries (excluding food and household products) which need significant price hikes in order to match the average margin conditions that were held over the past five years. More than 40 industries need a price hike of 10% or more! Another 86 need a price increase of at least 5%. (Note: margin analysis comes from ICE-Alert modeled data and are margins per $100 of product sold)

Here then are the Top 10 Negotiation Hazard Industries (excluding food and consumer products). This table answers the question: To restore margins to year-ago or five-year average levels, industry product prices have to increase by how much on average? Source: ICE-Alert (January 2007)   http://www.ice-alert.com/ 

Click to enlarge.)

To uncover negotiation hazards (and opportunities), at ICE-Alert we examine price trends relative to costs, which is how we are able to estimate industry margin conditions. The complete January edition of ICE-Alert will be released during the week of January 29.

Victor Maliar and I have been running a comprehensive and unique cost model for 400-plus U.S. manufacturing industries for more than 10 years. Results from the model are published in the ICE-Alert report (ICE = Industry Cost Escalation).

Our subscribers, to date, have generally been in the procurement/supply chain fields, but now with pressures to pass along cost hikes being so high, many sales, marketing and finance managers are looking to ICE-Alert to help justify much needed price increases. Of course, one purchaser’s hazard is a salesperson’s opportunity!

News yesterday that Ford Motor Company reported its largest annual loss ever increased doubts about the future of Detroit. (General Motor’s decision today to delay earnings and restate past results only fueled greater concern.)

The bad news overshadows the tremendous progress both automakers have made on the supply management front. It also raises a serious question about the discipline: how much impact can supply management really have on the health of a business?

As reported here, both Ford and GM have committed and achieved big supply savings in the past year. Ford reports progress on its goal to cut the number of suppliers by 60% and shave $1.8 billion from its supply bill. In fact, earlier this month Ford reported that all its cost-cutting initiatives — including its procurement goals — were ahead of schedule.

Similarly, at last report, GM was on track to reduce its global spending by $2 billion in 2006. This progress was reaffirmed (although without detailed nubmers) in an interview with Fortune Magazine, GM CEO Rick Wagoner cited reducing structural and supply costs as his company’s top achievement in 2006. And, when it finally does report, GM is expected to post a profit for Q4 2006.

Yet, despite their supply management overhauls, Ford and GM will report significiant losses for 2006. And analysts (and the world) have serious doubts about the future of both automakers. These dynamics reminded me of what one business exec once argued against the benefits of supply management improvements: “Cutting costs will only get you so far. If you’re going to succeed, you’re going to have to grow.”

His comment was right. But his implications were wrong. Companies that view supply management’s only role as cutting costs are doomed to failure. (And supply managers that feel cost cutting is their primary role will never get respect within the company.) Just consider findings from Aberdeen Group’s CPO Agenda, which rated the number one role of supply management function as mitigating risk and assuring supply. Procurement’s other chief activities included, expansion into emerging markets, supporting compliance initiatives, and capturing innovation inherent within the supply base.

The cost and supplier reduction efforts of Ford and GM have grabbed the headlines, but the supply management engine within these organizations are driven by more strategic motivations:

• Standardization and reuse: A key driver for supply base rationalization efforts was to support company initiatives to reduce the number of vehicle platforms and to encourage parts standardization and reuse across the vehicle platforms. GM and Ford will be taking a page out of Toyota’s book by offering a huge array of market-specific vehicles worldwide. However, these new models will be built upon only a handful of vehicle platforms. This will lower costs, improve quality, and enable multiple models to be built in a single manufacturing plant. And, like Toyota, GM and Ford will share an increasingly larger number assemblies, sub-assemblies, and parts across models and across vehicle platforms.  
• Modules: Detroit is also looking to have suppliers take on more responsibility for design and manufacture of full modules — such as complete interiors. In one sense, GM and Ford will become master assemblers, snapping together a handful of modules that were built and often designed by their Tier 1 (or Tier 0.5, as they are now sometimes called) suppliers. It’s important to note that these Tier 1 suppliers will also take on a larger responsibility for sourcing and managing sub-tier suppliers. And GM and Ford will look to expand initiatives to leverage spending and share contracts for raw materials and parts with key suppliers.
• “Right-Shoring”: GM has very publicly stated its intention to rethink its low-cost country sourcing strategy. The automaker is now assessing supply in emerging markets not only on manufacturing and labor costs, but also on the total landed costs (e.g., tariffs, VAT, transportation, handling, etc.), risks, and leadtimes. However, only part of this move is located by cost and supply assurance. The bulk of GM’s future growth lies in emerging markets, particularly in Asia. (Demand for vehicles in China alone is slated to jump 12% annually for the next four years.) To capitalize on this opportunity, GM is rethinking its vehicle stylings and pricing (smaller is better) and building supply and manufacturing plans that can both meet growing demand and satisfy local content requirements. On that latter point, GM already has multiple joint ventures in China. The JVs have given GM 11% of the market. And GM is negotiating similar JV’s with manufacturers in Central and Eastern Europe.

These initiatives are vital to the future of Detroit. And are further evidence of how supply management is the engine (or at least, a vital piston) in driving key corporate strategies forward.

When investigating global sourcing strategies, I was surprised by the admission of a handful of supply management executives that their initiatives to source more from emerging markets was not driven by a strategic plan or analysis. Instead, these execs confessed, “This whole thing got started because our CEO heard about it from another CEO on the golf course.” (Sort of like when CEOs started pushing reverse auctions after eBay hit it big — without fully understanding the technology, approach, or risks.)

A new Economist survey of more than 1,000 corporate executives signals that CEO-driven low-cost country sourcing (LCCS) initiatives have hit the mainstream. According to the study, CEO Briefing: Corporate Priorities for 2007 and Beyond, CEOs cited global sourcing as the second-biggest force impacting the global marketplace. However, the study also suggests that CEOs now have a better understanding of the opportunities and risks of sourcing from emerging markets. 

(It is important to note, that global sourcing was only slightly behind the number one impact on global business — “rising demand in emerging markets”. This finding reinforces that global supply management is now firmly entrenched on the coroporate agenda.)

Not surprisingly, Asia was the top region CEOs were pushing their supply team to source more from, with 60% of execs feeling these region “offers the greatest sourcing opportunities.” Within the Asian region, execs are bullish on increasing sourcing from China and India. On a global basis, Central and Eastern Europe were a distant second-choice for low-cost supply opportunities, with just 15% of execs pushing sourcing from the area.

Importantly, CEOs no longer view sourcing from LCCS as a slam dunk for cost savings. In fact, the study showed evidence that execs now understand at least some of the risks involved with sourcing from emerging markets:

• Skills shortage: The biggest concern raised by CEO’s was the global talent crunch — this is especially true in emerging markets where execs cited lack of available talent as the primary barrier to growth. “If there’s one limiting factor to growth, it is people and talent,” said one General Electric exec cited in the study. The Economist reports that wage inflation in the Indian IT sector is about 20% and turnover is double that. The study also reports that “most multi-national operations in China must contend with 20% - 30% annual staff turnover rate and recruit 1,00 plus employees annually.” Supply chain talent is among the most scarce in the region, with logistics firms saying they struggle with competitors poaching their talent. In response, many CEOs say their companies are improving their training and advancement programs to keep top performers.
• Logistical challenges: CEOs are beginning to understand that low manufacturing costs and labor arbitrage are only part of the supply cost equation. Specifically, top execs — many of whom have visited emerging markets in recent months — now recognize the immature and strained transport networks within developing countries. Says one company cited in the study: “The 2,150-km journey between Kolkata and Mumbai can take a cargo truck some seven days to navigate, at an average speed of 11 km per hour, with some 32 hours spent waiting at tollbooths and checkpoints.”
• Economic instability: CEOs are aware that inflationary and currency risks of emerging markets can quickly cut into cost benefits from sourcing there. For example, the Economist reports that inflation in India has almost doubled in the past 12 months. “Housing prices are skyrocketing and strong wage gains are fueling buoyant domestic demand.”
• Sustainable supply: According to the study, “Environmental issues and climate change are creeping up the [CEO’s] agenda.” Interest in more sustainable energy sources and environmentally and renewable materials and products are being driven by a mix of public interest, global regulations, and “rocketing” oil prices. Some CEOs report that these pressures are causing them to rethink their supply and logistics strategies, including changing the mix of freight and adopting fuel-efficient, low-emissions vehicles. (It should be noted that the majority of study respondents hailed from outside the U.S. Other regions of the world, particularly Europe, are far more advanced in their support and execution of environmentally and socially responsible supply and business practices.”

Overall the findings from the Economist study should be good news for supply managers, suggesting that you may finally get the attention and support you need for your global supply initiatives. It also suggests that your top brass may have more realistic expectations about what to expect from your low-cost country initiatives. Use their support to develop the talent, policies, processes, and systems you’ll need to achieve both their near-term and your long-range goals.

Those of you doubting my prediction that 2007 would go down as The Year of Sustainable Supply Strategies, can’t deny it now. The past weeks have witnessed big and highly publicized commitments from the White House and top corporations to adopt more environmentally and socially sound business practices.

Last night in his State of the Union address, President Bush proposed cutting US gasoline usage by 20% over the next decade, use more sustainable energy sources, and ease US reliance on foreign oil (more on that later).

The President’s comments followed recent commitments from big-name corporations — such as DuPont Co. and General Electric — pushing for mandatory CO2 emissions caps and the development and adoption more sustainable engergy sources and more environmentally friendly products.

Of course, I warned you that more stringent regulations were coming. But, as I noted before, the leaders in corporate responsibility and sustainable supply strategies are not viewing these approaches as an added cost of business. Instead, they are see sustainability as a way to operational and supply costs, increase brand equity and revenues, and penetrate new markets. (It didn’t go unnoticed that the fastest growing business units for both DuPont and GE are those focused on sutainable energy and resources, such as cellulosic ethanol or desalinization technology.)

I have chronicled on Supply Excellecne how companies like Hewlett-Packard, Toyota, Adobe Software, Microsoft, Google, Wal-Mart, and others have used sustainable supply strategies for a competitive advantage. I have even shown how supply management organizations, like HP and Airbus, are beginning to use environmental and social responsibility as part of their supplier selection and performance measures.

The cover story of the latest BusinessWeek issue says it all: Imagine a world in which eco-friendly and socially responsible practices actually help a company’s bottom line. It’s closer than you think.

Indeed, BusinessWeek features more detailed accounts of how sustainable supply strategies employed by some of the above companies, including Wal-Mart and Toyota, have helped reduce costs, increase sales, and secure a competitive advantage in the marketplace. (Look no further than the recent rumors that Ford may partner with Toyota to get access to the hybrid motor supply that the Japanese automaker had the foresight to develop ahed of the marketplace.) As the article states: “Now there’s a more sophisticated understanding that environmental and social practices can yield strategic advantages in an interconnected world of shifting customer loyalties and regulatory regimes.”

The article also provides evidence of how sustainable supply strategies can also help avoid supply risks. “Embracing sustainability can help avert costly setbacks from environmental disasters; political protests; and human rights or workplace abuses.” The article points to supply disruptions experienced by Royal Dutch Shell in Nigeria and Unocal in Burma. It also fingers the impact poor supply oversight had on Sony when it was revealed  

But additional examples of how sustainable approaches can mitigate supply risk are plentiful. Consider the impact that not effectively assessing and monitoring labor practices has had on companies like K-Mart or Nike. Or how HP’s recycling effort helped it weather price and supply challenges for precious metals. And look how other companies, like Starbucks, have turned the proactive development and protection of labor and wages in emerging markets into a positive marketing strategy.

The overall message to supply management executives: If you’re not on board with sustainable supply strategies — get off the boat. 

Yesterday, Rob Martens, Director of Purchasing EMEA for NAVTEQ, shared techniques his organization used to assess procurement performance and develop a plan for improvement. Today, Rob shares how NAVTEQ organized its turnaround and the results they’ve achieved.
 

What does NAVTEQ’s new procurement organizational structure look like?
 It is a regional center-led structure, supported by worldwide purchasing policies and procedures and a companywide ERP system from PeopleSoft.

What role has and will technology play in your procurement transformation?
 Technology played a crucial role. Fortunately the company already used an ERP system but the purchasing module was only used by the distribution group. We have extended the use of the components and rolled out the application to other user groups, such as IS, Marketing and Facilities. Currently we are rolling out a bolt-on e-Procurement application that will enable electronic requisitioning and workflow approvals that will replace paper based requisition. Considering we have over 125 locations worldwide this is a critical success factor.

What were the key metrics you are using to measure your performance?
We are measuring savings, contract compliance, number of requisitions processed and number of orders per supplier. Another major measurement is spend under contract. Our distribution group measures supplier performance.

What have been the results you’ve seen to date from your improvement initiative?

The Purchasing activities are now performed on a much higher, professional level, based on global policies and procedures. The purchasing module of the ERP system is utilized to a much larger extend and by most divisions. All major spend suppliers are operating under written agreements. Supply risks have been mitigated by sourcing backup suppliers. The number suppliers per spend category has reduced and last but not least considerable financial savings have been achieved.

What are the top challenges and lessons learned from this initiative?
 Our key challenge, after making these improvements, is to maintain the attention of senior management. It is, quite natural in our dynamic and fast changing business environment, that they are very much focused on revenue growth. Also the strategies and plans for implementation have to be flexible in order to adjust to new circumstances that provide new drives for purchasing improvement. For example the implementation and registration to the ISO/TS 16949 standard increased the need for better supplier selection and performance measurement processes and the Sarbanes/Oxley rules made way for improving the purchasing related approval processes. Different business circumstances can be a challenge but are also an opportunity to reach your long term world class purchasing goals.

Thank you, Rob. And congratulations on your tremendous progress and results. You’ve provided some very useful advice Supply Excellence readers can employ to jumpstart their own supply management initiatives.

Late last year, I had the honor of moderating a track on best practices for supply management organization and process at ProcureCon Europe. Track presenters included supply management executives from Nokia, HH Print, American Express, and NAVTEQ. I previously posted on Nokia’s presentation on Center-Led procurement structures here.

The first installment of this two-part interview appears below:

NAVTEQ is a company whose products everyone uses, but are often unaware of it. (Example: Just this morning I noticed that NAVTEQ is the source of map data for both Google Maps and Microsoft maps.) Can you give a brief background on Navteq?
NAVTEQ is a leading provider of comprehensive digital map information for automotive navigation systems, mobile navigation devices and Internet-based mapping applications. NAVTEQ maps fuel virtually every automobile manufacturer that currently offers a navigation system as well as all of the leading online mapping applications, major wireless, fleet and government applications. 60 million were used everyday in 2005 and NAVTEQ has equipped over 10 million vehicles since 1999. Today, NAVTEQ is headquartered in Chicago, IL, USA with approximately 2,100 employees in over 125 offices worldwide. NAVTEQ has major production facilities in Fargo, North Dakota, USA, and a support center in Yokohama, Japan. (for more information visit www.navteq.com)

Like many fast-growing companies, NAVTEQ didn’t always have a strategic focus on procurement or supply management. Can you describe the procurement organization and environment when you first arrived at NAVTEQ?
Due to the quick growth of Navteq, centralization and professionalism of the purchasing function was lagging behind to what was needed and purchasing activities were highly fragmented due to the nature of NAVTEQ and lack of central purchasing leadership. This resulted in various policies and procedures which were insufficiently harmonized within the company. My task became first to initiate a company-wide purchasing policy and procedures, based on a shared strategy. Next, we worked on improving spend analyses and reporting. We rolled out an existing ERP system across all departments and involved all other disciplines, such as Legal, whenever that was appropriate.

What were the business issues and objectives that caused NAVTEQ to put a focus on improvement procurement efficiency and effectiveness?
We quickly realized that vast improvements of procurement efficiency and effectiveness would contribute directly the financial performance of the company as a whole. There was a lot to be gained in that area. In addition, we wanted to contribute to reducing product liability and revenue risk. By creating a professional purchasing group efficiencies could be gained and expertise leveraged. ISO 9001 and ISO/TS 16949 stipulated certain purchasing and supplier management related requirements that were difficult to achieve when this would be left to the operational people entirely.

So you really had to bootstrap a procurement organization. Please describe the components of your supply management improvement plan?
First I started with analyzing the current situation and proposed a number of solutions. For I mapped the existing purchasing processes and analyzed the spend per category, per division and per supplier the spend under contract. The ratio of controlled vs. uncontrolled spend that flowed through the ERP system and were all purchasing activities were taking place. In combination with the requirements of the upcoming ISO 9001 and ISO/TS 16949 certifications this created the sense of urgency that was needed to lead change.

What were some of the business methods/tools you used to conduct your assessments and drive your improvement plans?
I used Van Weele’s 6 step purchasing process to depict the generic purchasing process in a simple way and Peter Kraljic’ Purchasing Portfolio Matrix to distinct the different spend categories towards supply risk and financial impact, leading to dedicated purchasing strategies. The DuPont analysis was a useful tool to show senior management the impact of purchasing savings on the return on investment of the company. The SWOT matrix revealed the strengths, weaknesses, threats and opportunities of the purchasing processes of that time. For implementing change I used the Change Acceleration Process (CAP) and tools that I have learned when working at GE. Thanks, Rob for sharing your experience. You’ve offered some valuable tips Supply Excellence readers can use to assess procurement performance and developing a plan for improvement. I look forward to Part Two of this interview when you showcase how you bootstrapped a procurement organization and the results you’ve achieved.

There is some good news admist the current global supply market funk. Oil prices last week slumped to an 18-month low, thanks to mild winter weather in the U.S. and Western Europe. (I guess the analysts are ignoring the state of Colorado.)

And while recent OPEC production cuts and uncertainty whether dimplomacy will win out between Russia and Belarus to reopen a major pipeline could stem the slide, the price dip should provide you leverage to remove fuel surcharges from your transportation and other supply bills.

David Rotor, blogmaster at Procurement Investor, for tipped me off to this recommendation in his comment to my Top Picks for 2007 post. On his own blog post, David reports that oil prices have declined 25% in the past six months.

Most transportation and travel service contracts include clear rules for fuel surcharges. These are usually tied to an oil price index, to enable both parties to clearly monitor and apply or remove surcharges based on fluctuations in the index.

However, David points out that, “Less obvious will be suppliers of other goods that add fuel surcharges to their freight/delivery charges, depending on how those are negotiated. Having had a look in recent weeks at some corporate invoices, those surcharges don’t seem to be declining as quickly as they rose.”

Upshot: it may be time to push suppliers to remove fuel surcharges. It’s only fair. And it should come as a welcome relief to offset some of the price increases you are experiencing in other areas, such as precious metals or travel.

I received multiple e-mails about last week’s post on IACCM’s Top Negotiated Terms. In the post, IACCM President and CEO Tim Cummins and I raised concerns that supply and contract managers were spinning their wheels by rehashing and renegotiating standard T’s & C’s, inhibiting their ability to collaborate with trading partners on what really matters: maximizing and continuously improving the value achieved from buyer-supplier relationships.

While agreeing with the premise, Supply Excellence readers asked an even greater question: what can we do about it?

Now I don’t want to steal the thunder from this week’s Top 5 Supply Strategies webinar on Sure-Fire Contract Compliance Strategies, but I will share some tips and resources you can put into use to streamline contracting and agreement management at your organization. From my experience with over 170 contract lifecycle management solution customers and from rubbing elbows at IACCM Conferences and other industry events, I have uncovered the following best practices for contract compliance:

• Use standard contract language and templates.
• Standardize methods and procedures across the full contract lifecycle.
• Automate contracting and management proceses.
• Ensure support at the top — and in the trenches.
• Align policies, performance, and incentives to drive compliance.

But don’t take my word for it. Hear first-hand how Qualcomm has used these and other strategies to streamline contracting and improve agreement management performance by attending the Sure-Fire Contract Compliance Strategies webinar tomorrow. There’s still time to register for free here.

Hate to say, I told you so. Or rather, the market watchers told you. I just reported on it.

Last week I shared reports from the leading travel industry analysts warning of a 4% - 5% increase in business travel costs. Over the weekend, these predictions began their climb to fruition.

On Saturday, four of the five US carriers raised round-trip air fares by as much as $10, signaling the industry’s first major boost this year. Brace yourselves for more increases to follow.

United Airlines drew first blood, boosting fares across its entire network. American Airlines and Delta Airlines quickly followed suit, instituting fare increases on all routes. Northwest Airlines raised prices only in markets where it competes with low-fare carriers.

All told, round-trip fares climbed $6 - $10, depending upon the airline, lane, and flight length.

See last week’s post for strategies to combat soaring costs across all types of travel spend.