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March/April 2003

NAGS Notes
HOWARD     hot topics

nags@mitchell.com

Every Part an “R” Part 
by Catherine Howard

Hot air balloons, blood pressure, the stock market, elevators, birds, bees, volcanic ash, temperature and water are just a few examples of the often-cited principle of gravity: “What goes up must come down.”

Of course, there are several types of gravity—the gravity of nature, health, personal and financial matters, economics, etc. The longer something stays up, the more energy it takes to sustain its loft.
So, speaking of the gravity of economics, perhaps it is time to contemplate the NAGS® List Price. You could say the NAGS List Price is the frigate (a.k.a. man o’ war) bird of the glass industry.

This bird can traverse vast distances without coming down. It flies throughout the oceans without stopping—feeding on the wing and never willingly alighting on the water. It sustains loft by the labor of wings and by the ability to utilize thermals that rise from the ocean. But even this incredible bird must come down to nest, rest and refuel for the next journey.

Like the frigate bird, the NAGS List Price has been soaring for a very long time, sustained by the inclusion of labor in the materials and buoyed by reliance on manufacturers’ truckload lists. And, yes, it has made two dramatic dips into the harsh sea of reality, only to rise again on the thermals coming off the published truckload lists.

Changing Spaces
I suppose many will agree with this analogy, often referring to NAGS as “bird-brained.” So perhaps it is time to shed the feathers and transmute into something less volatile, more respectful. Something reptilian comes to mind—steady, grounded and less prone to the whims of gravity. Yes, that’s it, although I’m sure some will feel we have already arrived, given the cold-blooded nature of reptiles. It’s not that this hasn’t happened before. Just as the archaeopteryx was the transitional dinosaur that changed into a bird-like creature, we are the bird-like creature changing back into something of a lizard.

Here is where I am going with all this nonsensical meanderings: NAGS is changing the way we derive and manage Benchmark List Pricing that we offer to the industry as a retail list price for auto glass to be used in trading partner negotiations. But this is not quite the end of the story.

We started this transformation gradually in May when we announced we were departing from using the manufacturers’ published truckload prices and, instead, were looking at the actual market acquisition cost to use as our base in establishing our benchmark pricing. We did it again in September and then fine-tuned our approach in January with the addition of more ‘R’ parts.

And we intend to continue on this path, ever gradually over the course of perhaps two to three years, until every part will be an ‘r’ part. That will mean one of three things to this industry: labor will have to increase, discounting levels will have to drop or both, and, in all probability, in that order. By then, the feathers should be totally converted to scales, the blood grown cold and the claws sharpened. 

 

Catherine Howard is the vice president/general manager of National Auto Glass Specifications International in San Diego.

 

 

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