There are mysteries which have confounded the best minds on this planet since the beginning of time. Is there life after death? What killed the dinosaurs? How, and more important, why did Kim Kardashian ever become a celebrity of note? The one big question I have wrestled with for the last decade or so is: Why is NAGS pricing still relevant anymore?
The latest price list recently came out and to no one’s real surprise, prices have gone down. Should there be any drama in this bit of news? Look at what sector uses NAGS pricing to base its discount demands upon? Whose interests does Mitchell International, the owners of NAGS truly represent?
I was once told, if it looks like a duck, flies like a duck and quacks like a duck, there is a good chance that the avian figure I am looking at is a duck. I can’t say the same for the stated business purpose of NAGS.
The mission of NAGS, it seems, is data and it is twofold. It provides a service of parts numbering and of pricing. NAGS created a glass parts identification system that is universally accepted by manufacturers, distributors and retailers. Many of the old timers remember that NAGS pricing was the benchmark, the gold standard, so to speak for the entire industry. Retailers were given discounts off NAGS list to buy product in singles or bulk from wholesale distributors. Retailers then had a basis point to set prices from and there was order and symmetry in the world of auto glass.
It should be noted that NAGS added a service over time. As computers became more prevalent within the industry, it was uniquely positioned to create software programs for the auto glass industry which has likely become the chief profit center for this company.
Over time, we have seen some distributors abandon using the NAGS pricing list as it failed to adequately provide for profit margins as encapsulated parts and Chinese imports began to increase in numbers. Companies created their own pricing formulas to sell to retailers that bore little relationships to posted NAGS prices. A true “Tower of Babel” was created since no consistency existed anywhere in the pricing structure, especially for smaller shops which buy on a part-by-part basis.
One and only one sector has steadfastly clung to NAGS pricing. The obvious reason insurers or their third-party administrators (TPAs) client/vendors use NAGS is its “acceptance” or its universality. In this industry, almost every pricing model used is based on the current published NAGS price list. Is pricing realistic when discounts exceed more than 25 percent? Is NAGS relevant?
It was reported by glassBYTEs.com™ that prices dropped on approximately 75 percent of the parts viewed. I’m wondering if 75 percent of retailers found that our other operating expenses dropped by the same proportion? We’ve seen energy prices increase, taxes are up and insurance has climbed. Has your distributor called and announced that it is voluntarily lowering pricing factors lately?
I will admit that wholesale glass prices have gotten substantially cheaper over time. So cheap, that in some cases, the actual replacement moldings can be more expensive than the glass itself. However, the true cost of any installation is made up of other factors such as labor, adhesives, energy, transit and administration expenses, just to name a few. The industry has not seen these costs drop by any significant amounts, so if the industry is going to rely on a single benchmark price, relevancy must exist for all, not for just a few factors.
Take TPA contract practices, for an example. Guaranteed Average Invoices (GAI) seems to be the buzz acronym of this decade. Our largest TPAs use this term and not NAGS rates to determine billing models for client insurers. However, they then turn around and demand substantial discounts from the NAGS price model for any glass provider that is forced into billing through them. Proof again that what is good for the goose should be for the gander as well.
As NAGS prices climb, I believe a distributor’s or retailer’s inventory value goes up as well. However despite this, auto glass retailers often receives immediate faxes from a number of insurer claim’s departments or TPAs demanding a few more percentage point discounts commensurate with the list price rise that NAGS deemed to give.
How many of us remember the “rebalancing” of NAGS prices? That occurred more than a decade ago when list prices for many windshields neared the $1,000 mark with a minimum of 75-percent discounts (and higher) offered or demanded from insurers. The system went well off the rails and should have been reformed or scrapped entirely, but since it seems to serve the needs of the few and not the majority, it lives on.
It can be argued that NAGS is a tool that has outlived its time. We have forces throughout the industry which have worked to disrupt inventory ability in order to make a reasonable profit throughout the supply chain.
NAGS pricing is no longer a benchmark but more of a residue of an era of symmetry that no longer exists. It’s time to put it out to pasture and move on since it has lost relevance. Something I’m sure it has in common with the Kardashians.