An interesting exchange on India and China:
Gilmore: Let’s talk about manufacturing in Europe and North America. There is a lot of general concern and political heat around “saving” manufacturing in the west, amidst low costs and pressure from China and other low cost countries. Can adoption of Theory of Constraints principles help revitalize those manufacturing companies?
Goldratt: I think that question doesn’t consider what is really going on. What is this “save western manufacturing?” Let me talk about China and India – these are the two you are afraid or, right?
I work a lot in China. You know the biggest problem in China is right now? Getting people – for the 2nd shift. Can you imagine not enough people in China? Salaries are now skyrocketing. Statistics say that in 2004 salaries rose by 24%. When they are finalized in 2005, it will be much higher.
Have you been in Shanghai, for example? You may have had images like I had of rickshaws and bicycles – No! This is a western town. With the best cars everywhere, and fewer bicycles than in Holland. I sent an assistant to go and look in some shops for bargains. She said, “Sorry Eli, the prices are the same as in Amsterdam.”
So, China is not only becoming a big producer, but a huge consumer. If what we see now continues another 5-6 years, China will be by then the largest consumer market in the world.
What’s happening in India is even more fascinating. I can say without blinking an eye that in India they have the best management of companies in the world. Better on average than I have seen in Europe of the United States. There problem was that they had put chains on themselves, in terms of regulations, tariffs, etc. This is gone.
Because of it, the biggest boom is happening. India is also growing at 8-10 percent per year, and salaries are also rising rapidly. So again, in just a few years you will see a huge consumption market.
Do you understand what together this means? In a few years, we will triple the world consumption in 5 to 6 years. You will see supply chain bottlenecks everywhere in the world. The best thing that ever happened to us is what is happening now in China and India. It is time to stop complaining about Chinese producers and focus on how to enter the Chinese market or export to China and India. What huge, beautiful markets.