How to create "Use/Activate" function?

There are many ways you can do this, If you want them to get a prompt to press the key, you will need to add a function that watches the distances between the players and items.

--assuming we have the character and Rootpart of a character as a variable
for i,v in pairs(TableListOfItemsToPickUp) do -- goes through each item on the ground
    if (v.PrimaryPart.Position - RootPart.Position).magnitude < 10 then -- if the distance is less than 10 studs
        TellPlayerToPressButton(character) -- function to show GUI 
        local Holder = instance.new("ObjectValue") -- make a holdervalue 
        Holder.Value = v
        Holder.Name = "CanGrab"
        Holder.Parent = game.Players:GetPlayerFromCharacter(character) -- put it in player, maybe player.CanGrabItems or something for orginization
        spawn(function() repeat wait() until 
            (v.PrimaryPart.Position - RootPart.Position).magnitude > 10 
        end)
    end
end

If you loop that, you "should" have a system that puts a marker in your player when you are close to an item. Now just check the player for anything named "CanGrab" in the player, and use the Value of that to manipulate the item.

I should note, this is a VERY messy and bad code. Just a general example.