A preferred supplier has the benefits of economies of scale, high quality and freshness, low lead time, low out of stock and yield loss, low number of suppliers, low distribution cost, contractual arrangements, quality control systems, and low negotiation and risk factors; whereas the drawbacks include potential rejection of products, financial penalties, and high asset specificity. TOPS converted its regular suppliers into value-added suppliers by adding such activities as quality control, cutting, trimming and packing.