Value is created when customers purchase goods or services at prices higher than the cost of performing the value activities. The value activities include primary activities that encompass the physical creation, delivery, and selling of the product or service, while the support activities provide the infrastructure to carry out the primary activities. From a supply chain perspective, we create value by maintaining a cost advantage in each primary and support activity and through the coordination and alignment of each activity.
Porter indicates each firm plays a role in a larger system: a value system.1 We know this value system as a supply chain where there is supplier value (upstream), firm value, and channel and buyer value (downstream). Taken together, firms create a competitive advantage through the integration and coordination of all members of the value system. Since organizations need to create value for their shareholders, customers, and other constituents, executives and managers are wise to bring supply chain and operations into the boardroom.