The secondary purpose of this paper is to examine a VMI contract with stockout-cost sharing under limited storage capacity, in which a stockout penalty is charged to the supplier when stockouts occur at the customer. Since Fry,Kapuscinski,andOlsen(2001) examined a (z,Z)-type VMI contract, which specifies minimum and maximum inventory levels and the corresponding under and over stocking penalties, many researchers have studied the (z,Z)-type VMI contract and its variants. For example, ShahandGoh(2006) examine the (z,Z)-type VMI contract in a deterministic setting