A company is considering relocating production to a lower-wage country.

When a company relocates production to a lower-wage country, fluctuations in currency exchange rates can significantly impact profitability without affecting the product's landed costs. Exchange rate volatility can lead to unexpected increases in costs when converting foreign earnings back to the home currency or when paying for imported materials and services in a foreign currency. This can erode the cost advantages gained from lower wages. In contrast, changes in labor costs, commodity prices, and product quality typically affect the direct costs and product landed costs.

References:

Christopher, M. (2016). Logistics & Supply Chain Management. Pearson.

Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation. Pearson.