The owner of a wholesale/retail distribution company was proud and confident of his retail division. “Retail is where I started and it was how I was able to expand into wholesale.” The retail lines had been profitable and steadily growing for many years and represented about half of the business. He was certain his retail division was still performing well.
But a Trailing 12 graph told a very different story. Trailing 12 sales are 12 months of sales plotted as a data point. For example, the month of December would be all sales from January 1st to December 31st. The month of January would be all sales from February 1st to January 31st. The benefit of plotting sales this way is that it removes all seasonality.
Typically, companies plot monthly sales against budget and see this:
But if you use a Trailing 12 graph on the same data, you could see this:
With deeper diving into the different retail product lines, it was discovered that one of the major selling lines had dwindling sales. The sales reps had commented that an offshore manufacturer was able to sell the same quality product at retail for what we were buying wholesale. The graph showed the impact of the competition. The owner was able to go to the manufacturer with Trailing 12 graphs and samples from the competition. The manufacturer did a major cost cutting reorganization and was able to reduce the wholesale cost.
Trailing 12 graphs is not just about sales. It can be used on any data recorded by time.