Global supply chains are under renewed scrutiny. In this article, Dr Shuo Wang, Lecturer in Financial Accounting and Programme Director for MSc Accounting and Finance at the University of Edinburgh Business School, explains new evidence showing how “plural sourcing”, producing a small proportion of an outsourced item in-house, can help multinationals keep costs low while improving social and environmental standards.
car frame in factory

The hidden cost of outsourcing

We spent three years analysing data from more than 9,000 US manufacturing firms. The pattern is stark: the greater the share of production a company outsources, the lower its corporate social responsibility (CSR) score tends to be. That is hardly surprising; once activity leaves the factory gate, it slips beyond easy measurement. Managers struggle to verify carbon emissions, overtime records or safety practices in distant plants.

Our study, published in the Journal of Supply Chain Management, confirms the downside, but also points to a cure. Firms that simultaneously make and buy the same component, running a parallel line under their own roof, can learn which chemicals, labour hours and energy inputs go into each unit. They can then quiz suppliers with authority, spot anomalies and share practical fixes. In short, plural sourcing turns vague audit checklists into informed, operational conversations.

A proven approach, repurposed

Plural sourcing is not new. Toyota began building small batches of electronic parts in-house in the late 1980s to benchmark its long-standing partner Denso. We extend that logic from quality to sustainability. If Zara can stitch limited runs of garments in Spain, it can model fair wages and safe dyeing processes before scaling production with overseas partners.

Our data show the technique works best when two extra conditions apply:

  • Secondary segments (the parts of your business outside your core manufacturing lines) gain the most, because internal know-how is weakest and risks are easiest to miss.
  • Local presence (owning any facility or office in a supplier’s country) strengthens oversight by cutting travel time and cultural distance.

What can leaders do next?

Plural sourcing is not a call to reshore everything, nor a licence to micromanage. It is a targeted experiment that keeps global trade flowing while restoring public trust. To get started:

  1. Pick one sensitive component. Choose an item linked to negative sustainability headlines, such as cobalt cathodes, palm-oil derivatives, cut-and-sew operations, and produce five to ten per cent in-house or with a nearby alliance partner.
  2. Measure like an operator, not an auditor. Record real inputs at the work-bench level (energy kilowatt-hours, pollution volume, labour minutes), not just tick-box compliance. Build simple dashboards you can share with suppliers for joint problem-solving.
  3. Close the loop publicly. Report back to investors and consumers on what you learned and how supplier practices have changed. Transparency, not perfection, builds credibility.

Globalisation’s smart guard-rail

Calls to abandon overseas production ignore the prosperity that trade delivers. Plural sourcing offers a balanced route: keep the efficiencies of global networks, but add a low-cost safety rail that protects workers, communities and brands. When CEOs next weigh the optics of outsourcing against tight margins, remember that making even a small slice yourself can pay reputational dividends far larger than extra factory floor space. It is time to make, buy, and thrive.

Shuo Wang

Shuo Wang is our Lecturer in Financial Accounting and Programme Director for MSc Accounting and Finance.