A way to increase efficiency and output is to specialize. Specialization occurs when a factor of production is devoted to a specific role in the production process.
Adam Smith coined the phrase ‘division of labour’ to refer to labour specialization. The division of labour refers to labour being given their own specific tasks in the production process. Basically the idea of the division of labour begins with an assembly line and a bunch of workers. Let’s say if each worker uses the whole assembly line they produce a total of 20 units of output.
Alternatively, each worker could specialize in the production process and take on specific roles. One worker could handle the raw materials and the next worker could piece together components. Another worker could use one piece of machinery and a different worker could use another piece of machinery. Maybe the last worker supervises all the others. Because each worker is specializing they are more efficient. Each worker’s skills have been matched up to their role, they are doing what they are good at so they are better and more efficient at it. Also, workers are repeating their role so they can develop their skills in their specific roles. Workers ‘learn by doing’, develop and pick-up new and better skills whilst repeating their role. Maybe workers find short-cuts to produce output quicker and cheaper. Better skills means labour productivity is higher, output per worker rises and let’s say a total of 200 units of output are produced. By specializing, workers become more efficient and total output increases.