Final answer:
A value stream includes all steps in a process that contribute to creating a product or service for which customers are willing to pay, including essential aspects like the engineering design process and the budget for product development. Mathematical models assist in estimating and comparing costs.
Step-by-step explanation:
A company's value stream is a concept that encapsulates all the steps in a process that contribute to the creation of a product or service for which the customer is prepared to pay. This includes essential steps such as the engineering design process, as well as other important decisions that define a firm's behavior.
These decisions may relate to the budget for product development, the drawings used to design a product, and optimization processes like assessing the rate of flow of water through a hose for the sake of efficiency in production.
While customers typically do not directly pay for non-essential processes, in a well-optimized value stream, all activities should ideally add value or support the value-adding processes.
Mathematical models may be used to estimate costs and assist in making production decisions, such as predicting costs for alternative solutions during the idea generation phase and analyzing cost-efficiency.