Friendshoring with Deel: Gain the Edge in Supply Chain Resiliency

In an era marked by rapid globalization, intricate supply chains, and unforeseen disruptions, businesses increasingly recognize the imperative of building supply chain resiliency. The unexpected supply chain disruption brought about by the Covid-19 pandemic, the Russia-Ukraine and the October 2023 attacks on Israel has forced companies to rethink supply chain risk. These risks remain industry agnostic as the cost of supply chain disruption exceeded $4 trillion during the Covid-19 pandemic. Additionally, recent Houthi attacks on seaborne cargo trade in the Red Sea continue to increase geopolitical and global supply chain risk. To hedge against these risks, companies adopted friendshoring, nearshoring, and reshoring strategies to strengthen their supply chain’s agility and adaptability. The recent passage of the $280 billion CHIPS Act in the US or Mexico supplanting China as the US’ largest trading partner in 2023 highlights this growing trade trend. This article delves into friendshoring, nearshoring, and reshoring, what’s driving these trends, and the benefits of fortifying supply chain resiliency. We’ll discuss the competitive advantages of Deel’s US PEO and Payroll and Global Payroll solutions as companies address workforce bottlenecks, an Achilles heel in de-risking their supply chains, bringing them closer to home.

• Friendshoring: A term coined by US Treasury Secretary Janet Yellen in a 2022 speech, friendshoring involves outsourcing business processes to countries with cultural, linguistic, and geographical similarities. For example, the Philippine BPO sector’s recent friendshoring push capitalizes on many companies’ cultural and linguistic compatibility with the Filipino workforce.
• Nearshoring: A nearshoring strategy entails shifting manufacturing and production operations to countries close to home markets. In 2022, Romania and Poland saw supply chain-related investments increase by 86% and 23%, respectively, as companies sought to mitigate the challenges of the evolving manufacturing landscape in China. Companies often choose neighboring countries to capitalize on shorter supply chains, reduced transportation costs, and improved responsiveness.
• Reshoring: Reshoring is the process of bringing business operations back to the home country after a period of outsourcing to foreign locations. Concerns over quality control, intellectual property protection, and data security often drive this strategy. Reshoring allows companies to regain oversight and control over their supply chain processes, ensuring compliance with local regulations and optimizing the use of internal resources.  Bath & Bodyworks’ success in reshoring its entire production from China to a single manufacturing campus in Ohio highlights the benefits of this strategy. China represents the largest source of reshoring US jobs, followed by Mexico, Canada, India, and Japan.

Supply chain resilience is the adaptive capability of the supply chain to prepare for unexpected events, respond to disruptions, and recover from them by maintaining continuity of operations at the desired level of connectedness and control over structure and function. The current Ukriane-Russia conflict has impacted negatively over 600,000 global businesses that rely on Russian or Ukraine suppliers—another example of the need for companies to strengthen supply chain resiliency.

Several factors contribute to the increasing adoption of friendshoring, nearshoring, and reshoring strategies: 

• Supply Chain Disruptions: The COVID-19 pandemic and the recent conflict in Ukraine exposed vulnerabilities in global supply chains, leading to widespread disruptions. Additionally, natural disasters and climate risks threaten global supply chains forcing companies to develop shorter and more agile supply chains to respond effectively to unforeseen events. 
• Geopolitical Uncertainty: Trade tensions, regulatory changes, and political instability in various regions have prompted businesses to reevaluate their global supply chain strategies and consider more stable alternatives. For example, China continues its regulatory crackdowns on trade across many sectors, including banking, insurance, and technology. Additionally, concerns about the concentration of semiconductor manufacturing capacity have prompted countries such as the US to invest substantially in developing their manufacturing capacity. 
• Rising Labor Costs: In some traditionally outsourced regions, such as China, labor costs have been rising steadily, diminishing the cost advantage of offshoring. Companies are now seeking cost-effective solutions that maintain quality. Many are finding these alternatives in their domestic markets.
• Customer Expectations: Customers are demanding faster delivery times and more personalized services. Friendshoring, nearshoring, and reshoring enable companies to meet these demands by improving supply chain responsiveness.

Companies seeking to realign their supply to the emerging realities of global trade recognize that effective workforce management remains a potential Achilles heel. As such, Professional Employer Organization (PEO) services have emerged as a strategic solution for businesses seeking to streamline their human resources functions and focus on core operations. PEOs are best suited for small and medium-sized enterprises with employees of 50 to 250, although larger organizations utilize these services. A PEO acts as a collaborative partner, offering a comprehensive suite of outsourced HR services to alleviate administrative burdens and optimize workforce management. By entering into a co-employment relationship, businesses can tap into the PEO’s expertise in payroll processing, employee benefits administration, compliance with labor laws, and risk management.

Deel, a leader in global workforce management, offers innovative solutions that are revolutionizing how businesses manage their HR processes. In an era where remote work and global teams are becoming the norm, Deel’s platform stands as a leader in efficiency and reliability. The company ranks as the #1 Global HR platform, allowing companies to rapidly onboard global teams in as little as 5 minutes.

In the US, Deel’s US PEO and Payroll product combines payroll management, compliance assurance, benefits provision, and HR administration, making it an all-in-one solution for businesses seeking efficient and effective workforce management.

• US Compliance: Deel’s US PEO and Payroll product ensures businesses remain compliant with US labor laws and regulations, helping them avoid legal issues and penalties. Deel US PEO Solutions provides registration support in all 50 states, allowing for efficient tax filing and payment.  
• Efficient Payroll Processing: With Deel’s user-friendly interface, businesses can easily manage payroll processing, ensuring accurate and timely employee payments.
• Comprehensive Benefits Support: The product offers various benefits, including health insurance and retirement plans, allowing businesses to attract and retain top talent. Deel benefits solutions include medical and dental, 401K, accident, and gap insurance. Benefits solutions comply with federal, state, and local benefit laws and ACA and COBRA insurance programs.
• Minimized Administrative Burden: Deel handles HR administration tasks such as onboarding, offboarding, and employment contracts, reducing the administrative workload for businesses. The company provides instant access to in-house support with a dedicated CSM and 24-7 in-chat support.  
• Data Protection: Deel provides tight security and data protection in its US and global solutions. The company is SOC2 and ISO 27001-certified. These certifications are among the most robust for information security management. They also offer GDPR-compliant solutions and work with multiple SSO providers.

At its core, Deel’s Global Payroll Solution simplifies the complexities of paying remote workers, contractors, and freelancers across different countries and currencies. This platform goes beyond traditional payroll processing, seamlessly integrating compliance, contract management, and payment facilitation into a unified experience. Over 15,000 organizations across many industries in over 150 countries use Deel for workforce management solutions. Major clients include Reebok, Forever 21, Nike, and Subway. These companies all are global, with extensive manufacturing, sales, and marketing activities across multiple continents. 

• Compliance Made Effortless: Navigating intricate international labor laws, tax regulations, and employment contracts can be daunting. Deel’s Global Payroll Solution automates compliance procedures, ensuring that payments are made in accordance with local regulations in over 150 countries. This not only saves time but also minimizes the risk of legal complications.
• Contract Management Redefined: Hiring remote workers often involves extensive paperwork. Deel simplifies this process with standardized contract templates and electronic signatures, facilitating seamless onboarding for both businesses and employees. 
• Cross-Border Payments: With Deel, disbursing payments to global team members becomes a breeze. The platform offers over 120 currency options, allowing workers to receive payments in their preferred currency while avoiding the complexities of international banking. 
• Expert Guidance: Deel understands the intricate landscape of global payroll, compliance, and labor laws. Through its platform, businesses gain access to experts who can provide guidance, ensuring that payroll processes align with the legal requirements of each region. Companies benefit from Deel’s 200+ in-house advisors and experts in local jurisdictions in over 100 countries.

Finding the right solution for your company’s needs will depend on various factors, including the nature of the business (manufacturing, services, etc.), operating presence (US or International) development stage (startup vs. large corporate), and the nature of the workforce (contract vs. permanent). Deel’s US PEO and Payroll and Global Payroll solutions hold immense potential for businesses aiming to establish a solid global presence while maintaining operational efficiency.

Whether companies are embracing the friendshoring, nearshoring, or reshoring trends, Deel empowers them to focus on their core objectives while entrusting the complexities of global payroll management to its innovative platform. In the US, the Chips Act and the Inflation Reduction Act include many spending initiatives and an estimated 1.5 million new jobs. Many of these jobs will be in renewable and other climate-related sectors. Additionally, the Infrastructure Investment and Jobs Act will create an expected two million jobs in the decade following its November 2021 passage. With Deel, businesses can confidently navigate the complexities of international payroll, ensuring accurate, compliant, and timely payments for their global workforce.

The re-globalization/fragmentation debate remains ongoing in global trade and industry circles. Irrespective of the current trends in international trade, companies continue to embrace third-party technologies to manage a rapidly evolving global workforce. Friendshoring, nearshoring, and reshoring are not new strategies; some activity has been ongoing for over a decade. However, the focus on these trade strategies will often flare up triggered by certain global conditions. Experiences from the Covid-19 pandemic and current geo-economic trends continue to drive momentum as businesses recognize the value of building supply chain resiliency in the face of these uncertainties.  

The recent passage of the Regional Comprehensive Economic Partnership among the various East and Southeast Asian nations is expected to create numerous friendshoring and nearshoring opportunities. Moreover, multi-currency payroll solutions from companies such as Deel will serve as a catalyst for economic development within this regional trade block.

In the current global environment, agility remains the operative word, particularly regarding supply chain resilience. For companies seeking to stay agile, forging the right partnerships remains critical to gain a competitive advantage in their respective markets. Deel’s US PEO and Payroll and Global Payroll solutions allow companies to mitigate risks, enhance agility, and optimize costs in a changing global landscape. By embracing friendshoring, nearshoring, and reshoring, companies can better manage their supply chains positioning themselves to thrive amidst uncertainty and disruptions, ensuring a more robust and resilient future. 

For more information, head on over to Deel to book a demo or get in touch with us at ClearSky 2100 to learn more. Also, be sure to follow us on LinkedIn.

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