Effective Use of Resources – Resources and Their Usage (Senior 3 Entrepreneurship) | Ganzaa

Resources and Their Usage

Lessons

Senior 3 · Entrepreneurship

Resources and Their Usage

4 lessons

Lesson 4 of 4

Effective Use of Resources

25 min

Same money, different results

Kamali and Uwase each make liquid soap in Huye and each spend Frw 200,000 a week on inputs: the same chemicals, water, containers and a helper. Kamali weighs every ingredient, closes his containers, sells the oldest stock first and has trained his helper to fill without spilling. Uwase measures by eye, has one leaking drum, and last month threw away a batch that went off in the heat. At the end of the week Kamali has 400 litres to sell and Uwase has 320.

Nobody gave Kamali more resources. He used the same ones better. This lesson shows how to measure that difference and how an entrepreneur manages each type of resource so that little is wasted. The soap makers and their figures are illustrative.

Definition

Efficiency: producing the greatest output from given resources, or a given output from the fewest resources, with the least waste. Effectiveness: achieving the goal that was intended.

Productivity: output per unit of input, $\text{productivity} = \frac{\text{output}}{\text{input}}$

Sustainable use: using a resource so that it meets today’s needs without reducing what future generations will have.

Example: Kamali is more efficient than Uwase (more soap from the same inputs). A soap maker who makes very cheap soap that nobody wants to buy is efficient but not effective.

How to use each type of resource well

Resource	Effective use	Misuse to avoid
Natural	take only what is needed; replant trees and restore quarries; harvest rainwater; save water and energy; follow environmental laws and licences	overcutting, overfishing, polluting rivers, leaving pits open
Human	recruit people with the right skills; train them; give clear roles; pay fairly and on time; keep the workplace safe; motivate and recognise good work	idle workers, untrained staff, overwork, favouritism
Physical	service machines on schedule; use each tool for its purpose; store and secure equipment; insure it; rent out idle equipment; replace what is obsolete	running machines until they break; leaving tools out in the rain
Financial	budget; keep records; separate business money from personal money; borrow only for productive uses; collect debts on time; save for emergencies	spending the business’s cash on personal wants; borrowing to pay old debts
Time	plan the day and week; set priorities; keep to deadlines; avoid idle time and long queues	late deliveries, unplanned trips
Information	keep accurate records; back up data; share it with those who need it; protect customers’ data	lost records, unchecked rumours

General principles

Plan before you buy. Know which resource will limit output next (Lesson 1) before spending.
Measure. Productivity, cost per unit and the wastage rate show where resources leak.
Control stock. Sell the oldest stock first (first in, first out) so that perishable goods do not spoil.
Use appropriate technology: a solar dryer, a weighing scale or a spreadsheet can save more than it costs.
Follow the waste hierarchy below: reduce first, dispose last.

Rwanda’s law on plastics: effective use by law

Rwanda applies the top step of the hierarchy, reduce, to the whole country. Law N° 17 of 2019, dated 10 August 2019, prohibits the manufacturing, use, importation and sale of plastic carry bags and single-use plastic items. A few items, such as home-compostable plastics, are allowed only with prior authorisation. It repealed Law N° 57 of 2008, which had banned polythene bags. For businesses the law is both a rule and an opportunity: shops pack goods in paper, cloth or woven bags, and entrepreneurs make and sell those alternatives.

Tip

Memory hook: PMS-R. Every resource needs Planning (how much, when), Maintenance or care (servicing, training, storage), Security (locks, insurance, backups) and Records (so waste can be measured). In an exam, apply the four letters to whichever resource the question names.

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Worked example 1: measuring efficiency

Use the opening case. Both makers spend Frw 200,000 on inputs; Kamali makes 400 litres and Uwase 320 litres; both sell at Frw 800 a litre. Compare their productivity, cost per litre and profit.

Step 1: productivity (litres per Frw 1,000 of inputs, so the input is 200 thousand): Kamali $\frac{400}{200} = 2.0$ ; Uwase $\frac{320}{200} = 1.6$ .

Step 2: cost per litre: Kamali $\frac{200{,}000}{400} = 500$ Frw; Uwase $\frac{200{,}000}{320} = 625$ Frw.

Step 3: weekly profit: Kamali $400 \times 800 - 200{,}000 = 120{,}000$ Frw; Uwase $320 \times 800 - 200{,}000 = 56{,}000$ Frw.

Step 4: interpret. Uwase loses $400 - 320 = 80$ litres, a wastage rate of $\frac{80}{400} \times 100\% = 20\%$ . The waste costs her $120,000 - 56,000 = 64,000$ Frw of profit every week, more than half of what Kamali earns.

Worked example 2: is maintenance worth paying for?

A maize mill earns a profit of Frw 40,000 a day. Servicing it every month costs Frw 30,000. Without servicing it breaks down about once every 2 months; each breakdown costs Frw 90,000 in repairs and 3 days without milling. Should the owner pay for servicing?

Step 1: cost of one breakdown: $90{,}000 + 3 \times 40{,}000 = 210{,}000$ Frw.

Step 2: per month, since it happens every 2 months: $\frac{210{,}000}{2} = 105{,}000$ Frw.

Step 3: compare: servicing costs Frw 30,000 a month, so it saves $105,000 - 30,000 = 75,000$ Frw a month.

Step 4: decide. Pay for servicing. Maintenance looks like a cost, but a machine that stands idle wastes every other resource that depends on it: the miller’s labour, the customers’ time and the business’s reputation. Figures are illustrative.

Warning

Common mistakes. (1) Treating every cost cut as efficiency: skipping servicing or training saves money this month and loses more later. (2) Confusing efficiency with effectiveness: a business can waste nothing and still fail if it makes the wrong product. (3) In calculations, comparing total output when the inputs differ; compare output per unit of input or cost per unit of output.

Ten years on: Rwanda’s plastic ban, DW News (about 4 minutes, 2018). Watch for how shops and shoppers changed the way goods are packed, and why the country chose to reduce plastic rather than try to clean it up afterwards.

What misuse costs

For the business: higher cost per unit, lower profit, breakdowns and delays, lost customers, fines for breaking environmental rules, and in the end closure.
For the country: resources used up that future generations will need, pollution of land and water, lost jobs and foreign exchange, and public money spent repairing damage.

Discussion: a cooperative has a spare pickup truck that stands idle four days a week. List three ways it could use the truck more effectively, and say which you would choose and why.

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Practice

Distinguish between efficiency and effectiveness, using a restaurant as the example.
Suggest two ways of using each of these effectively: (a) human resources; (b) physical resources; (c) financial resources.
Name the step of the waste hierarchy in each case: (a) a shop gives a discount to customers who bring their own basket; (b) plastic bottles are melted and made into fencing poles; (c) sawdust from a carpentry workshop is burned to fire a brick kiln; (d) a hotel refills glass water bottles.
A carpenter uses Frw 150,000 of inputs to make 12 chairs. After a training course he makes 15 chairs from the same inputs. Calculate the input cost per chair before and after, and the percentage rise in productivity.
A hotel’s electricity bill is Frw 180,000 a month. Switching off unused lights and changing to energy-saving bulbs cuts it by 15%. How much does the hotel save in a year?
Explain two consequences of misusing resources for a business, and one for the country.
“Law N° 17 of 2019 on plastics is bad for business.” Evaluate this statement.

Show answersHide answers

Efficiency is serving meals with the least waste of food, gas and staff time; effectiveness is achieving the goal, such as satisfied customers who return. A kitchen can waste nothing and still lose customers if the food is poor.
For example: (a) train workers; give clear roles; pay fairly and on time. (b) service machines on schedule; store and secure tools; rent out idle equipment. (c) budget; keep records; separate business and personal money; borrow only for productive uses.
(a) reduce; (b) recycle; (c) recover; (d) reuse.
Before: $150{,}000 \div 12 = 12{,}500$ Frw a chair. After: $150{,}000 \div 15 = 10{,}000$ Frw a chair. Productivity rises by $\frac{15 - 12}{12} \times 100\% = 25\%$ .
Monthly saving $15\% \times 180{,}000 = 27{,}000$ Frw; yearly $27{,}000 \times 12 = 324{,}000$ Frw.
Business: higher cost per unit and lower profit; breakdowns and delays that lose customers; possible fines. Country: resources depleted for future generations; pollution; lost jobs and foreign exchange.
Against the statement: the law created markets for paper, cloth and woven bags, cut the cost of plastic litter that blocks drains and harms farmland, and a clean country attracts tourists. For it: some firms faced higher packaging costs and had to change equipment or suppliers. A balanced conclusion: costs for some firms, opportunities for others, and benefits for the country as a whole.

1Same money, different results

2How to use each type of resource well

3General principles

4Rwanda’s law on plastics: effective use by law

5What misuse costs

Same money, different results

How to use each type of resource well

General principles

Rwanda’s law on plastics: effective use by law

What misuse costs