The Royal Mint
The Royal Mint as companies go, is quite a well-established institution. 1,129 years to be precise, since it was established under Alfred the Great. Until very recently it operated as an office of the Crown, having grown with the expansion of the British Empire, making coins for a good proportion of the world and more recently contracted by many independent countries. In 2010, however, it was decided that the Mint should be structured in a way that would allow it to make the most of the many opportunities it has to add value to its core business of striking coin. It ceased to be an executive agency and its assets were vested in a limited company, Royal Mint Ltd owned by The Royal Mint trading fund, itself continued wholly owned by HM Treasury.
It was a time of radical change for the Llantrisant-based manufacturing operation. After all there can have been few business transformation challenges to compare with that of transforming a thousand year old national institution into a modern manufacturing operation (though to be fair that process had been started back in 1968 when the Mint moved to a purpose built facility in Wales better able to cope with the demands of decimalisation). A new executive team was formed. The current CEO Adam Lawrence was appointed at the beginning of 2009, however some six months before vesting David Bowles was brought in to facilitate the transition as Head of Project Management. Today he is Director of Supply Chain, and the process has, he explains, demanded all the expertise in operational excellence and process planning he has gained in a career spent mainly in the steel industry.
The work of the Mint is, of its very nature, unpredictable and variable. There are three sides to the business, circulating coins (the production of all the UK’s currency requirements under an exclusive contract with the Treasury as well as contracts with overseas governments), commemorative coins and bullion. Commemorative issues for special events are a growing line. Events of national importance are usually marked by the issue of a special coin like the £100,000, one kilogramme gold coin designed by Sir Anthony Caro for the 2012 Olympics. Though legal tender, none of the 60 people who bought the limited edition are likely to go into a shop with it as its value is principally in its rarity. The latest on offer is a limited edition Alderney £5 Platinum Proof coin to commemorate 70th anniversary of VE day.
From a supply chain point of view it is clearly easier to plan for events like these than, say a royal birth. However there is an element of predictability in commemorative coins that is lacking in circulating coins, which are tackled on an order by order basis. Nevertheless all sides of the business are growing strongly. In 2013/14 more than two billion circulating coins were delivered to UK distributing banks and the Post Office. The UK’s decision to convert from solid cupro nickel in the smaller denomination coins to plated steel using the Mint’s proprietary aRMour technology. This concept has been sold to many overseas countries, with the Mint notably securing a three year contract with the National Bank of Poland to supply three aRMour brass plated coins. These coins are much more economical, and just as durable as the ones they replace.
In an environment of dynamic sales activity, David Bowles has had to lead a complete transformation in the supply chain function. “When I came to this business there was a lot of unpredictability in the planning, the production and the procurement too. We have put in some really robust planning systems now that mean we can have a really predictable supply chain with our suppliers.” Already, he says, the visibility in the supply chain has improved to the extent that he can discover in real time what coin is being created and on which machine.
To reach that level of predictability entailed changing the culture of the organisation as well as the processes. The incoming team brought with them ideas from the world of industry, and above all a common approach as to what it takes for a manufacturing business to be effective. “Just as an example, in the circulating coin business there was about 2,000 tonnes of work in process at any one time. Now we operate with about 300 tonnes.” Taking working capital out of the process is not a new thing of course, he appreciates, but at The Royal Mint it the established way of operation simply did not take working capital into account.
Changing that may seem obvious but it was certainly not easy. “A huge change process went across the whole organisation. It started from how we take orders in, and went right through how we plan and schedule, through to how the manufacturing processes are organised and managed.” All of this has been changed over the last five years, but continuous improvement is a never ending process, he emphasises. A huge step forward may have been taken but there remains a lot more to do.
Bowles’s remit combines operational excellence on the shop floor with business excellence in the back office. “Our big driver is to get everyone involved in continuous improvement, and so far we have been really successful in getting everyone in the business to ask the question ‘how we can do better?’ Managing risk and unpredictability is one challenge we have met head on.” A great deal of effort has been put into planning. He has put a ‘rough cut’ capacity plan into effect, which looks at a multiyear rolling forecast. “We take all the countries we deal with and give them a ranking as to how likely they are to place an order and on what percentage basis. We can then use analytics to look at different scenarios that could arise. Then we have sessions with the sales team to see where the gaps are, whether we are likely to be overloaded in certain months, or which customers we may have to move around.”
But there is a red line on order fulfilment. The Royal Mint will never commit to a contract unless it is certain it can fulfil it. That means securing the materials that will be needed, an additional challenge, as risk aversion is part of The Royal Mint’s ethos. This means that even if there’s an opportunity to buy forward at favourable rates it will always relate procurement to orders in hand. The principle is sound – we wouldn’t expect a company that is publicly owned to engage in speculative buying in today’s fluctuating metal markets, risking spectacular losses. However he can see the principle being tempered by sound procurement practices to some extent as time goes on. Basically precious metals would still be bought at spot prices to lock in cost and pricing of individual orders, but base metals like steel, nickel and copper could be bought further ahead than they are now.
As one would expect, process optimisation is a priority. Planning must be built around constraints in the process, and one that has been identified is in the presses. These are the machines we think of when we talk of ‘striking’ a coin or a medal, stamping the head and the tail. “At present we are able to plate more blanks than the presses can stamp, so we are involved in an exercise to see how we can increase capacity by operating the machines differently and improving efficiency without having to buy more presses.” A good illustration of how the ancient craft of coining throws up exactly the same problems as might face a manufacturer of car parts!
So five years down the line, how does he evaluate the supply chain processes at The Royal Mint? “We think we have the business down to a stable enough level, and the processes robust enough, to actually implement a full ERP system now,” he says. The system that has been selected for this venerable business is Microsoft Dynamics AX, and though the process is still at the design stage at the time of going to press it is on the edge of full implementation and will go live by the end of 2015. These are the qualities that Bowles needs to connect the business from manufacturing to procurement to sales. “We couldn’t have done this a couple of years ago. The processes were not robust enough. I predict a few challenges but nothing we can’t handle and I can see fantastic opportunities down the line to do much more work with our suppliers. It will facilitate integration with the suppliers’ own systems, and introducing a greater level of catalogue buying and even supplier controlled inventory.” These are refinements not supported by the legacy MRP purchasing system.
Having replaced the UK’s 5 and 10 pence pieces, the Mint is now preparing for its next big job, upgrading the flagship coin of the United Kingdom. 2017 sees the launch of a new £1 coin. For the Mint this entails taking around 1.6 billion old coins out of circulation and replacing them with the new ones in very short order. Designed by a talented 15 year old (and to those who can remember remarkably like an old threepeny bit) this is a high tech coin that incorporates the ultimate in security, a new high security feature perfected by The Royal Mint.
With electronic readability and specialised plating even apparently simple coins are turning into complex manufacturing. “It is the most secure coin ever produced, with the latent security features that are going into it. We are excited about it but it is a big supply chain challenge,” says David Bowles. It is not the only one though. Next year a visitor centre, with catering facilities, exhibitions, interactive displays and even tours round the Mint will be opened at Llantrisant. Given the mystique surrounding The Royal Mint it will doubtless attract millions. “It will be a big success and another challenge for my team. We have not been involved in retail but now we will have a shop to stock!”