Seafood Supply Chain Risk
Do you know how your fish is produced? In 2016, the AP published an investigative report on how seafood produced with slave labor in Indonesia ended up in the U.S. . Because of this investigation, P&G, Nestle, Purina, Costco, and other companies were slapped with class-action lawsuits . Retailers must source legal and ethical seafood, all while keeping costs low and quality high. In addition, 67% of U.S. consumers now “want to know that their fish can be traced back to a known and trusted source . High demand for seafood has led to serious overfishing. If the current situation does not change, some scientists predict populations of fish species we currently consume will collapse in 30 years . Kampachi Farms aims to change that by using digital technology such as automated feeders, ocean current mapping, sensors, and GPS tracking to ethically farm better quality fish at lower costs and with less environmental impact .
Traditional Ocean Fish Sources
Ocean fish generally come from commercial fisheries or fish farms. As wild fish stocks became depleted, aquaculture’s popularity grew. For many species now produced through aquaculture, farmed production is substantially higher than the highest catch ever recorded . However, the crowded and dirty conditions of many fish farms cause disease to spread quickly from one pen to the next and create pollution from high concentrations of fish waste. Farmers combat this with heavy use of antibiotics. Fish farming operations are located close to shore for easier access when feeding, monitoring, and harvesting fish. These waters are also gentler on equipment compared to the open ocean . Rapid growth in ocean aquaculture, heavy antibiotics use, and pollution have caused environmental damage to sensitive marine habitats and raised questions about the sustainability of aquaculture . Without an alternative approach to producing fish, quality will decrease and costs will rise as demand far outstrips supply.
Kampachi uses digital technology to tackle some of the issues around aquaculture and help increase supply. As technology advances, Kampachi seeks to innovate new ways to reduce the cost to produce fish. By creating more sustainable production methods, Kampachi can also help ensure fish stocks remain stable, keeping long term costs of fish down. How will Kampachi accomplish this?
Kampachi is exploring the use of sensors, automated devices, and digital connectivity to remotely monitor and feed its fish populations . This enables Kampachi to increase productivity (quantity of fish produced per employee). Why does this matter? North American fishery and fish farm employees are only 31% more productive than their Latin American counterparts . For Kampachi to produce economically valuable fish, it needs to increase productivity or create high value-add products. With digital technology and automated feeders, Kampachi can increase productivity and reduce total labor costs.
Remote technology also means Kampachi can space pods out and place them offshore in deeper waters with stronger currents. This reduces disease risk and antibiotic costs. As an added benefit, the currents sweep away fish waste and reduce environmental impact on delicate coral reefs around the Big Island . Not only does this help Kampachi’s long-term prospects, it creates additional value. Consumers perceive farmed fish to be more available and cheaper but will pay a premium for wild caught fish, which they perceive to be higher quality due to lower use of antibiotics and reduced handling . Open ocean farming falls somewhere in the middle, much like cage-free eggs fall between regular and free-range eggs. Digital technology has enabled Kampachi to innovate a new operating model (open ocean aquaculture) and create value which Kampachi can capture by pricing its fish at a premium relative to traditional farmed fish.
Risks and Additional Steps
Kampachi hopes to develop “drifter” pods that float with ocean currents and can be tracked with satellite communications technology . As of right now, the technology needed to collect ocean current data and analyze it isn’t advanced enough to support a full commercial drifter farm . Kampachi partnered with NOAA and Lockheed Martin to develop these technologies further and created a single point mooring system with commercialization potential . While Kampachi scales this model, some next steps to consider could include:
- Building strong relationships with distributors. Kampachi can more accurately predict its final output compared to fisheries or traditional farms because of its 98% fish survival rates. Armed with this knowledge and complete certainty of ethical production, Kampachi could help the rest of the supply chain manage inventory risk. Stronger customer relationships leads to higher and more reliable revenue.
- Developing this technology for other species with high value, can’t be farmed in shallow waters, or have unreliable yields. Kampachi can command a premium for these types of fish.
- Develop other feed options besides GMO soy, which may cause customer backlash .
 Worm, B. et al (2006) Impacts of biodiversity loss on ocean ecosystem services. Science, 314: 787