Factory of the month: The Royal Mint

Posted on 7 Dec 2012

Tom Moore visits the Royal Mint to discuss how the 1,000 year-old company has redesigned the metal in your pocket to slash coin costs and shorten manufacturing times.

Filling wallets and pockets across the world, the journey of every coin begins at the Royal Mint’s Ministry of Defence-guarded site in south Wales.

From the two pence coins dropped into coin machines in arcades along the coast to the coins used to buy your groceries, it all begins here in this Aladdin’s cave of manufacturing.

“If a product never reaches the replenishment point then it never gets manufactured” – David Bowles, Head of Operational Excellence

Royal Mint has a mighty lineage. It started life under Alfred the Great around 1,000 years ago the company has continually adapted its business and improved manufacturing processes while maintaining its marriage with tradition that provides a USP and keeps it making medals for acts of valour.

An example of how the Royal Mint, which used to be housed at the Tower of London, has moved into the 21st century is its aspiration to attain the Shingo Prize by 2015.

Some people may question why the Royal Mint is changing its culture and the way it operates to attain this prestigious award. But for Gail Roberts, supply chain director, it is simple. “We are now saying this is what the Royal Mint does and it’s who we are,” she explains. “We are looking to change so that we are held up as a global industry leader that consistently demonstrates best practice. The Royal Mint is not just setting itself up against its competitors but some of the best manufacturers in the world too. We are proud to be seen as a leading edge minting organisation but we also want to understand how we measure up as a global manufacturer.”

With the average length of service at the company among its 800 employees standing at 26 years, the management team admits it’s a challenge to get staff to think in a different way. To overcome this each employee now has a personal development plan connecting them to and giving them ownership of the company’s vision.

The Royal Mint is backing up its cultural progression with the drive and hard objectives to achieve the Shingo Prize that you would associate with the stalwart of UK manufacturing.

Shingo is about identifying things to improve, quite the opposite of the common perception held by many manufacturers that cultural change programmes are as woolly as the sheep that roam the Welsh hills and a HR gig rather than delivering hard value to the business.

One objective to achieve the level of operational excellence required to achieve a Shingo prize is to increase the sales of aRMmour technology by 32% and has set a date of April 2013 to achieve this. aRMmour technology is the plating of steel with the coin’s more expensive finish metal, such as nickel for silver-looking five, ten, twenty and fifty pence coins, rather than the traditional method of creating a copper and nickel alloy.

“The products we buy from Asia are high quality and low cost, [the UK’s] got to compete with that” – David Bowles, Head of Operational Excellence

Armoured protection from alloy prices

Since the end of World War II all ‘silver’ coins have been made from an alloy 75% copper and 25% nickel. However, this make-up has become increasingly expensive so the Royal Mint’s adoption of steel and nickel will save it between £7m and £8m a year, following a surge in copper prices.

The Royal Mint believes that adapting its business in the face of the sometimes volatile alloy market will attract new customers. The Royal Mint is looking to withdraw and replace five and ten pence coins in the UK with nickel-plated coins. Uptake at home is essential if the company is to meet its Shingo target and convert another 10 countries to plated coins.

The price of copper has risen by so much over the last three years that low-end coins were worth more in scrap value than they were at face value.

With 15,000 tonnes of plated coin made this year, the Royal Mint’s new plating and manufacturing processes have improved its cost base and better managed variability, taking between 30% to 35% of the cost out, depending on the coin.

With holiday makers taking pound sterling out of the UK on their return home, only to be left in a draw collecting dust, £7m worth of coinage disappears each week – probably a fair exchange considering the British love of hoarding that has left my coin box spilling with euros, Swedish krona, East Caribbean dollar and the currency equivalents to the Dodo such as the Drachma and the Spanish Peseta.

Pressing on

With coins flying out of shoots everywhere you look, Royal Mint’s operations in an isolated pocket of South Wales are something of an Aladdin’s cave, with rattling coins quickly filling boxes destined to purchase a Halwa Bahraini (a jelly-like dessert made with saffron and nuts) in Bahrain, or for Jamaican jerk chicken, which has a roaring trade in sterling too during the Notting Hill Carnival.

The building, often battered by rain as you would expect in Wales, has a slight feel of a scout hut about it with several flags hanging around the manufacturing facility. It would be a fruit machine player’s dream factory visit as the tinkling of metals resonant with a jackpot win at an arcade or casino.

The site has 30 high volume presses that make circulatory coin for the UK and up to 60 other countries at a highly secure site managed by the Ministry of Defence. With the Royal Mint planning on opening a Visitor Experience Centre in 2013 many people are wondering (as with any good idea) why this hasn’t been done before. I wouldn’t be surprised if I’m not the only one to be tempted to jump in a box of coins while throwing my arms in the air screaming “I’m rich! I’m rich!” a la countless movie scenes.

“A large proportion of people that travel to Wales pass our building, so why shouldn’t we engage them with one of the oldest institutions in the world,” says Martyn Smith, supplier development manager. The arrival of paper notes, debit and credit cards has, seen no change (apologies for the pun) in the importance of the Royal Mint to the very fabric of society.

However, with David Bowles, head of operational excellence admits that demand from the Treasury has halved over the last ten years for coins issued into circulation because of paper and card payments and the trend towards cashless economies in advanced countries.

Circulating the work

With exports accounting for 70% of sales at the Royal Mint, the famously British company is witnessing strong growth in Africa as economies on the continent grow and countries without monetary systems set them up.

It is a completely different picture, with more demand for coins in developing nations because there are often problems with inflation. This causes coins to go out of circulation as they no longer have any value so the country has to bring a new coin in above it.

Royal Mint Medal Maker

The Royal Mint’s exports are, as a result of historical ties, large in former British colonies. Political links may have loosened but the trade links remained with strong readymade relationships translating into the modern day requirements of circulatory coin. Nigeria, Kenya and Sri- Lanka are now the Royal Mint’s biggest customers.

Paper-based economies have been adding coins to the currency mix recently, with Vietnam one example, opening up new export markets. “As economies mature they may require coinage at some level as they skip to card-based trading systems and that will continue to challenge the Royal Mint.”

The Royal Mint produced 4.1 billion circulatory and blank coins last year, taking on the challenge from its modern rivals and has done this by reviewing and reworking its entire manufacturing processes and systems.

Nine weeks to nine days

The process, which previously took nine weeks with coins stored at various stages of the process, has been cut to nine days. Creating a nine day start to finish period for all products, David Bowles, head of operational excellence is looking to drive that down by a further two days.

“We’ve made a predictable manufacturing system that has reduced inventory and cut what we scrap by 66% over the last two years,” he says. Three years ago the manufacturing process left 10% waste. This has now been slashed to just 2%.

“Waste coins are picked up a lot quicker now,” explains Bowles. “The shorter manufacturing time means that messages [such as a machine breakdown and other common reasons for waste] can be passed back in less time and doesn’t take so long to correct.

“[The process] didn’t run very well at all,” admits straight-talking Bowles. “We could get traffic between the different parts of process that meant you had to park coins and change operations within the process flow to complete other products. It was what we would describe as organised chaos but with the improvements made we now have much more control and decisions are made more scientifically based on capability, capacity and availability.”

But what enabled such a rapid improvement? Quite simply, it was being bold. The Royal Mint has implemented an entirely new way of manufacturing coins, a process which had remained largely unchanged for quite some time. It has substantially reduced the time it takes to perform both the old and new process.

The operational excellence team agreed a go live date for the process change and went out and did it. As part of ensuring that the changes become business as usual, the company holds daily flow meetings to ensure that operations are uninterrupted with no delays.

Bowles, who joined from Tata Steel, which supplies the Royal Mint with 20,000 tonnes of steel a year from Port Talbot, just west of Cardiff, established detailed capacity planning. A bespoke materials resource planning (MRP) system supported the transformation of a mindset from how many tonnes are made to the speed at which it can deliver.

Different coins have different manufacturing times due to complexity and size. “The capacity planner looks at how long it takes, the forward order book, the forward forecast and instantly tells us where we are under and over capacity because it knows how long each process takes.”

“If a product never reaches the replenishment point then it never gets manufactured” – David Bowles, Head of Operational Excellence

This has resulted in an improved stock management and cash flow, reducing its stock holding by 50% over the last two years. Led by Roberts, the Royal Mint has forged closer partnerships with its suppliers as it moves towards a just-in-time philosophy, something that takes a lot more bravery to implement than other companies due to the importance of its product.

The Royal Mint is proud of its long-term relationships with suppliers and works closely with them through its ‘working together’ programme to identify the value stream and focus on total acquisition cost rather than price. This programme has delivered in excess of £8m value improvement to the business in the last three years.

The former Tata man adds that a lot of engineering projects have been undertaken to improve the reliability of machines both internally and with suppliers. “We have a new impetus and are pushing to do more for customers, providing more reliable delivery as the manufacturing times have been shortened. Being more reliable and having taken a lot of the cost out is helping us to win more contracts.”

New steel

Spurring this new impetus was a wave of new management figures that arrived with new ideas. In 2009 Bowles arrived from Tata Steel, while just two weeks after Gail Roberts was brought in as supply chain director after roles at Tarmac and Allied Bakeries. Senior management had a complete makeover with Adam Lawrence appointed chief executive on January 1 2011, having joined the Royal Mint in 2008 following roles at Catalent Pharmaceuticals and Sterile Technologies.

The message was process, process, process – with new eyes being cast upon traditional ways of manufacturing coins to make more money for everyone. At the same time, the Royal Mint has a long-serving and loyal workforce that know the business inside out, carrying the business into the 21st century.

The word enabler is thrown around a lot by businessmen but there is no doubting that the three letters Ltd has supported the company’s heavy investment, with The Royal Mint officially vested as The Royal Mint Ltd on December 31, 2010.

What does this mean? First of all the company can now borrow money on the open market rather than from the Government, vital for securing the capital needed for longterm growth. Although it is still government-owned it is more free to operate and has taken several responsibilities away from government, such as pensions. Summing up, Bowles states, “It is a commercial entity in its own right now rather than an extension of the civil service.”

Flexing manufacturing muscle

And the Royal Mint’s new business flexibility is being matched in the skills department too. To support the massive reduction in manufacturing times, the company has upskilled a wide number of staff so people can move between different operations, such as annealing finishing and striking.

Gail Roberts, Supply Chain Director

“We are looking to change so that we are held up as a global industry leader” – Gail Roberts, Supply Chain Director

While boosting labour productivity, another knock-on has been that this has created a greater awareness of operations before and after a person’s usual station, supporting a higher volume of continuous improvement ideas. It has also made the Royal Mint more efficient in it use of agency staff, which it can have up to 150 (on top of its 800 employees) at any one time. Why is this important? There is a cycle in commemorative coin making that has boomed in the UK at various points over the last few years with the Queen’s Jubilee and the Royal Wedding of William and Kate. Take regular coin-boosters like Christmas into account and it’s easy to see the benefits improving labour flexibility.

Time is of the essence and the Royal Mint is set to have improved despatch to commemorative wholesale customers to 100% on time, will have recorded despatch of commemorative coins through its own sales channel to 90% of individual customers within 3 days, supported by the production of 100% of circulating coin orders on time by the end of 2013.

Buying time

The Royal Mint sells most of its commemorative coins during an event so quicker processing times is enabling it to make less in anticipation of the even and replenish stock to tighter replenishment figures. It takes less than a day to make commemorative coins and Bowles explains that “if a product never reaches the replenishment point then it never gets manufactured, reducing the amount of stock that gets either doesn’t sell, or sold at a reduced cost.”

One challenge is that commemorative coins come with bespoke packaging that can take up to three days to produce as the box, certificate and booklet is all outsourced. The design and operations team work closely with the supply chain team to speed up its time to market.

“There is a shortage of European sources for our type of packaging products and no doubt our lead times could be significantly reduced if a more local source were available,” says Bowles. “But the Royal Mint has a strong supply partner based in the Far East that consistently meets all the required ethical, social and environmental policies as laid down by the supply chain team.”

“The products we buy from Asia are high quality and low cost, [the UK’s] got to compete with that. People say it’s much better quality if you buy from the UK but that’s not what we find,” adds Bowles.

With exports making up 70% of the Royal Mint’s sales, it needs to plan for all occasions thrown up around the world. Whether it be political changes, the passing of a head of state or an Olympics coming to town that the country would like represented on its 50 pence – the flexibility of skills and workforce size enables the Royal Mint to react to demand that can come from the unlikeliest of places that are hard to predict.

David Bowles, Head of Operational Excellence

“We’ve made a predictable manufacturing system that has reduced inventory and cut what we scrap by 66% over the last two years” – David Bowles, Head of Operational Excellence

With minting’s important contribution to the very fabric of society, the Royal Mint, with its status as one of the world’s top five minting operations, has a plan in place should there be any significant change within the eurozone.“We are one of the only facilities that could possibly step in and help out should the situation for certain European partners become untenable [and need to leave the euro],” says the man from Swansea.

The Treasury and the government plan for different scenarios, one of the past political debates being whether Britain should join the euro. The Royal Mint is kept abreast of decision making so it can evaluate how long it would take to carry out a certain project – such as adding £2 coins into circulation, or other any major changes.

Processing a new era

As fluffy as culture transformation may sound to the metric driven or the cynical pragmatist, Royal Mint’s excellence programme has built an infrastructure with a ‘get things done attitude’ around the site.

Most business activity is now carried out and aligned to the operating principles of the Shingo model.

The Royal Mint has made some large investments over the last few years, with a state of the art effluent plant, new plating technology and new furnaces all up and running. Each investment has not been about just replacing old with new but about understanding what the best available technology is and how it helps the company with its aspiration to be seen as the best mint in the world.

In five years the Royal Mint plans to be a zero harm and zero waste to landfill site. It is lowering its landfill targets each year, aiming to send no more than 500 tonnes to landfill in the year to April 2013.

Following the recent start-up of the new effluent plant things are now up and running and Roberts, along with the rest of the management team, has her eye on coming in under this figure. Waste to landfill from the site currently stands at 300 tonnes but with the chemistry balance of the effluent plant now clearly where it needs to be going and nothing from it going to landfill, Roberts’ may well be right.

Plans are afoot to recycle water from the effluent plant that is currently discharged as it is clean of all chemicals. The Royal Mint will connect it to a reverse osmosis unit that will reuse water back into the process so that it doesn’t need to extract water.

The company has set in stone a web of targets across the business, including reducing energy usage by 5%.

Golden Eye

One of its more ambitious aims is to increase sales of gold bullion by 65% by 2014. It already has the expertise so now it is taking the yellow bar road by buying in gold bullion blanks and striking a sovereign to add value.

Admittedly the Royal Mint is a small player at the moment but it is investing and will use its 1,000- year strong reputation to enter the market.

Gold tends to double in value every 20 years. There aren’t many investments where you can guarantee that sort of return.

The Royal Mint is paving the way for a better, shinier future. You don’t become an old company without making new money and it is doing exactly that. I’d put money on the Royal Mint being here after I am, with strong export growth guaranteeing it a long future despite the growing use of card payment.

The case for physical money remains with the fragility of our digital banking system being severely tested over the last four years, propped up only by government intervention.