s - The Royal Mint_Case_Study

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					Question 1
What do you think are the ‘concepts’ of the Royal Mint’s products?

Question 2
Explain the criteria which the Royal Mint will need to take into account when it
designs new coinage.

Question 3
How might the concept of simultaneous design be applied in the design of coinage?

                                 The Royal Mint
A unique manufacturing operation in the UK is the Royal Mint at Llantrisant in South
Wales. The Royal Mint is designated as an Executive Agency responsible to the
Treasury of HM Government. The Chancellor of the Exchequer is appointed (ex
officio) as Master to the Mint. Its objective is to provide the Government with coinage
at a competitive price. The Royal Mint has the capacity to handle all of the UK
business and still be able to bid for contracts from those countries that do not have
their own minting operations. It serves over 60 countries in any one year and produces
in excess of three billion coins annually. Its manufacturing requirement ranges from
high volumes of standard coinage to individual service medals or commemorative

In the UK, the Treasury contracts the Royal Mint on an annual basis for the likely
requirements for coins in the following 12 months, and the Treasury is also
responsible for decisions on any changes to the coinage. The last coin that was
introduced was the new, smaller 10p coin; this involved an issue of over one billion
new coins and the withdrawal of all the old coins from circulation. This represents one
of the largest single projects undertaken and a massive logistic exercise to coordinate
the movement of the coins. The Royal Mint meets every three months with executives
from the UK clearing banks to discuss their requirements for currency in the shorter
term. These estimates are then updated at weekly planning meetings. The Royal Mint
would like to work to a ‘just-in-time’ schedule, but because of the nature of the
product and the implications of the money not being available, they are obliged to
keep a predetermined safety stock to cover any shortfalls.

As in any manufacturing operation, the unit cost of the product is a critical factor in
measuring performance, and in the case of the Royal Mint, there is a unique cost
ceiling, in that their cost base must always be less than the face value of the coins
being produced. Therefore, this mass manufacturing process must focus on
monitoring its operating costs. The issue of payment for the product is an interesting
concept within the ‘minting’ industry and in the UK. The clearing banks pay the face
value of the coins to the Treasury and the annual contract agreement with the Royal
Mint is based on the Treasury agreeing to cover a fixed percentage of their fixed costs
and the variable cost of each unit then purchased over the year. The Royal Mint can
then invoice the Treasury for the currency produced.

The coins are costed in terms of pounds per thousand pieces. Of that cost,
approximately 40 – 50 per cent comprises the raw material cost, with the next 20 – 40
per cent coming from the production process that transforms the raw metal into a
blank coin. The actual stamping of the die onto the coin and the simultaneous milling
of the edges form an almost insignificant part of the overall process cost, mainly due
to the vast economies of scale at this stage. The efficiency of the stamping process is
nominally determined by the life expectancy of the die, and the research at the Royal
Mint is involved in initiatives to improve the materials being used in both the coins
and dies to extend this period of use. The coining machines used in the manufacturing
process are flexible in that they can run to produce any of the UK and most overseas
coins without long changeover periods. Orders vary fro 1 billion coins for a large
country to an order of 5000 for a small island. The machines are able to operate at
speeds of up to 750 coins per minute and therefore the nature of a 5000 coin run is
very costly, but all the same still viable.

One issue has been the threat of the intrinsic raw metal cost exceeding the face value
of the coin: something that has been most prevalent in those countries facing high
inflation and that leads to coinage being withdrawn from circulation by those wishing
to capitalise on the returns available from the base material. In the UK, the smaller
denominations were reaching that point so the Royal Mint had to change the
composition of the 2p and 1p coins to a steel core with an electroplated copper outer
layer. This reduced the unit cost of the coins and also added to their expected lifetimes
because they used less expensive base metal. This new format of coin represents the
biggest change in the manufacturing process to occur over the past few years and the
pioneering of the electroplating technique, whereby a mild steel core is electroplated
with copper, nickel or brass, resulted in a process which will aid the conservation of
materials. The reduction in the costs is also being achieved without a noticeable
reduction in the recognised value of the coin. Another consequence of the
electroplating procedure is that the coins have magnetic properties due to the presence
of a mild steel core and this caused initial problems for vending machine
manufacturers and operators.


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