Understand costs before outsourcing

"Companies have been infected with a kind of herd mentality when it comes to moving operations to China," says Jeoff Burris, principal with Plymouth, Mich.-based Advanced Purchasing Dynamics and an expert on automotive-industry procurement practices. "If you have a real understanding of your cost structures and cost drivers, you may find that it's not necessary."

Speaking at Agility, Agile Software's recently held user conference, Burris pointed out that not all product life-cycle management systems are capable of "the comprehensive cost analyses needed from a purchasing perspective. You need the ability to get cost breakdowns from your suppliers and put those in analytic tools. I'm aware of at least several examples where companies moved offshore, or were contemplating moving offshore, when a true understanding of supplier costs would have enabled a price negotiation that would have allowed them to stay in this country."