I belive we are at a point where the only way small manufacturers can bring their own costs down to compete with the likes of china, is to bring manufacturing in house. The cost saving is then in the fact that you can optimise for your product line, and you dont' have the costs associated with the knowledge transfer ( information ) between your company and the CM. Dont' under-estimate the cost in time it takes to sucessfully get all the information that is required from you to us.
It also is quite possible for you to access the low cost component markets and pcb markets that the chinese do. You can get ahead if you make sensible investment in your own plant and being super organised.