Cheap is very often expensive. That’s the lesson being learned again by companies outsourcing production to China.

With the recent spate of food contamination and other product scares—from melamine in pet food to lead-painted Thomas the Tank Engine toys to toxic cough syrup—many companies in the United States are being advised to do what they should have done when they first moved production offshore: better assess their risks.

Specifically, companies need to do a better job identifying their supplier risks. That means asking some tough questions about exactly what they are buying and establishing the proper structures—both financial and physical—to protect ...