By anyone's standards, the unilateral request for a 90 day credit period as a cornerstone to Fairline's new drive towards lean manufacturing is a heavy price to charge for a slap up lunch at the Ritz. Let alone for an invitation to a conference.

So what exactly is lean manufacturing and what does it entail?

When current Fairline CEO Derek Carter moved from Lewmar to Fairline, he soon became aware that there was considerable scope to increase efficiency through eliminating 'waste'. He realised that to find ways and means of achieving lean efficiency, he would need to look outside the marine industry.

"We needed to look at methods used in the automotive industry and large companies such as Airbus, " he said.

There are two main aspects to lean manufacturing, he added. "The supply chain and the eradication of manufacturing waste. This does not mean cutting jobs. It means cutting out lost time, unnecessary repetition of tasks, low quality (or even missing) components."

To set the lean process in motion, Fairline recruited two experts. Mathew Taylor became supply chain director and comes from a background that includes Cummins and Nissan. David Hurst is manufacturing director and has spells at Toyota and Jaguar on his C.V.

"We aim to bring lean to each of our 12 lines and want to encourage our suppliers to go lean as well, " said Carter.

"Two have already decided to follow our example. We started by piloting lean methods on one of our 12 lines. Within three months, we saw productivity improve by an amount equating to 15% per annum."

According to Carter, there are around 10,000 parts in a boat, so every time someone on the line says "where is it?"

or a component part has been supplied with a change, time is lost. To record such manufacturing problems or delays, a large board is located by the line.

"Our employees are encouraged to write any problems or shortages encountered on the board, every day. Every evening the five line station managers meet to solve the problems and eradicate them from future manufacturing."

"Is it working?" I asked.

"Yes", Carter replied. "Waste on the pilot line is being eradicated. Productivity has improved by 15%, which equates to two extra 50 footers a year off this one line. As a byproduct, quality has also improved. The building teams are able to get it right first time, instead of having to solve problems. They feel more valued and are keener."

The other 11 lines all want to follow suit, he added. Four are going lean now and the rest of the twelve will do so over the year.

Dramatic headline "What about the 90 days payment terms?" I then asked.

Carter conceded that this made a dramatic headline, but stressed that the aim was to encourage suppliers to go lean as well.

"UK manufacturers are very good at innovation and intellectualising product design. But we all need to manufacture as efficiently as possible."

He was aware of the long term threat from burgeoning manufacturing bases such as China (even if one supplier who buys certain components in China told me payment was demanded prior to shipment).

I got the feeling that Fairline's 90 days payment terms were a starting point rather than a flat demand.

From conversations with many suppliers, it seemed that each was negotiating its own agreement and there was scope for variations depending on the size and nature of the supplier's business.

Carter explained that it took around six months to get from build start to final payment for a 74 footer, adding: "The bigger the boat, the longer the supply chain and build processes become." He was asking suppliers to recognise this and match it.

As a parting shot, I asked about the major sea change in Fairline's sales policy, with B A Peters Plc losing its distributorship. Carter said that, by removing a "layer", Fairline was able to get closer to the dealer and his customer.

In addition, the removal of this layer meant that the dealers would be able to improve their businesses thanks to what Carter called "industry competitive margins."

In other words, the distributor's margin has been removed from the equation and replaced by improved margins for the dealer and the builder - albeit in proportions he was not prepared to divulge. He drew a comparison with the way Mercedes now deals direct with its "sales centres" - whereby the lean philosophy is extended to finding the shortest distribution route to the market place.

It is no surprise that we have found it impossible to get "on the record" comment from any of these suppliers. After all, it could be dangerous to stick one's head above the parapets in such circumstances. But it is predictable that "off the record" opinions are plentiful.

So what does it all mean to Fairline, to its suppliers in particular and to the marine industry in general? Is this a one-off attempt by one company to manufacture more leanly and to bolster up its finances, or is it the beginning of an overall trend in the market?

Of course JIT (just in time) delivery of materials has long been the Holy Grail for large manufacturing companies, particularly in the automotive industry. And so have extended periods of credit.

By and large, suppliers to multinational giants such as Ford, Nissan or General Motors have come to accept these irritations as an inevitable, if unwelcome, byproduct of supplying huge volumes of goods on a regular and scheduled basis to a client who has a long track record of financial solidity.

Losses in sticky cycles Even if they rack up big losses in the sticky cycles, major motor makers tend to be worth their credit. Until, that is, something like the Rover car catastrophe crops up.

Then suppliers learn the hard way that the longer the credit terms given to the client, the bigger the stack of unpaid invoices becomes: each extra 30 days of credit given means an extra 30 days' worth of unpaid goods.

This inevitably increases the exposure to a larger potential loss. Unless, that is, you stump up the premium for credit insurance. Then, if your credit insurer refuses to cover a particular client, you have the perfect excuse to tell that client exactly why you can't offer him extended payment terms.

But even disregarding this extra risk exposure, the suppliers will also have to fund a new hole in their cash-flow projections. Large and established companies may have no problem with this, but smaller companies attempting to expand will.

A visit to the bank manager to request extra facilities because a major client wants to take longer to pay is rarely a comfortable experience.

And wholesalers will have the extra problem of trying to persuade their own suppliers to match the payment terms demanded by the OEM customer.

So why might a company such as Fairline wish to impose these extended payment terms on their suppliers? Many we spoke to echoed the sentiment along the lines of "forget the fancy words about 'high value supplier relationships' and being 'fully aligned with Fairline's values and business objectives'. They just want to use our money instead of paying us in 30 (which can mean 45) days."

One supplier pointed to the automotive background in parts of Fairline's senior management team. Maybe the thought process was "If it works OK in the motor trade, why not in boat building?"

The answer to such a line of thought, should it exist, might be: "The motor trade is ever so slightly bigger. And many suppliers enter into agreed three-year contracts with their customers - so they know what they will need to be supplying (and when) and can plan long-term production, budgets and cost controls accordingly. This is not the same as a non contractual take it or leave it approach."

Another supplier wondered whether the buy-out had anything to do with it, commenting that maybe the MBO team wanted to reduce gearing imposed by the £40 million price tag put on the business by the Renwick group.

And one supplier commented that Fairline had apparently claimed that relatively low recent profits (in relation to turnover) were largely attributable to rising material costs. Was he being invited to remedy this situation, he wondered?

In fairness to Fairline, some suppliers confirmed that the 90 days were not set in stone, but seemed negotiable.

A deal at around 60 days appeared to be available, but given that most suppliers reckon that 30 days credit has a habit of becoming 45, so perhaps 60 could creep up to 75 anyway?

Lacked financial backing Another line taken by many was that the new Fairline now lacked the substantial on tap financial backing it enjoyed when it had been wholly owned by Renwick - even if 3i is now a substantial stakeholder.

The suppliers intended no disrespect to the new owners of Fairline, but pointed out that Renwick's strength and track record provided a substantial comfort zone when it came to giving credit.

On a wider front, is this demand for 90 days credit symptomatic of developing trends in the marine industry?

And if so, can suppliers accommodate it, let alone stomach it?

One immediately looks at giants such as Bavaria and Beneteau. Bavaria, I am led to believe, not only pay well but will even settle up within 15 days in return for receiving an extra prompt payment discount of 1%. Such practices are normal in Germany, but I wonder how many firms in Britain either offer or receive prompt payment discounts?

As a small scale boat builder from the seventies to the start of the new millennium, I always asked for - and frequently got - extra discounts for paying between one and two weeks.

But this approach only makes sense if you have money in the bank and can earn more from taking the extra discount than you would otherwise earn in a deposit account.

It is unlikely - to look at the reverse side of the coin - that a discount in return for prompt payment outweighs the increase on overdraft interest when you pay a supplier early.

Instead of as late as you can get away with.

Buyers at Beneteau, on the other hand, are (I was told) beginning to flex their muscles and look at demanding more from their suppliers. And if one includes its satellite firms such as Jeanneau and Vauquiez to name just a couple, the Beneteau empire packs a mighty punch. It will be interesting to see whether they try to put an extra squeeze on their suppliers.

Closer to home, I asked David King of Princess Yachts what line his company takes with its suppliers. "We have no plans to ask for payment terms to be extended from what they are now, " he said.

So what will most suppliers do and how will they react to any demands for lower prices, JIT deliveries and extended payment terms?

Some might be sufficiently confident in the unique appeal of their product to risk suggesting a visit to the bicycle shed - especially if they can identify other markets that could take up any slack. Others will see merit in entering into a closer collaboration with their customer to look at ways of streamlining production and supply methods in the hope that, even with competitive prices and extended credit, their overall return from the business will improve.

Mutual trust But such relationships do demand a high level of mutual trust and a contracted commitment to a decent period of time. To quote grandfather once more; "there must be give and take". Or, as another Fairline supplier so succinctly put it; "for every quid there must be a quo."

One supplier took a very different line. "I wish the guys involved in the MBO all the best. They probably have their houses on the line. In return for my offering more frequent deliveries on a JIT basis, they agreed to a shorter credit term than originally requested. And perhaps the increased competition between Fairline and Princess, now that they no longer belong to the same holding company, will benefit everyone. Including their suppliers. Quite a few suppliers in the marine trade wouldn't survive long if they had to show the efficiency and reliability levels that are expected as the norm in the automotive business." Not surprisingly, he did not wish to be named.

It's early days to guess how the story will end. Time alone will tell - and these times will be interesting. With a planned turnover of £100 million for the next year, Fairline clearly intend to expand - which will benefit its many suppliers - and it is understandable that the new owners are looking for ways to improve efficiency and margins. On a positive note, if they succeed in gaining 90 days payment terms for advertising in the monopolistic UK motor boat press (or even from the directors of National Boat Shows? ), then they should broadcast the glad tidings.

Then the rest of the marine market can climb aboard and claim the same deal.