We use a deterministic (Q,r) inventory model (also known as the EOQ model with shortages allowed) under limited storage capacity to examine and compare four business scenarios: two VMI systems described in the above, an integrated supplier–customer system (or integrated system) where the supplier minimizes the supply chain total cost, and a traditional system where the customer manages her own inventory. We show that VMI with stockout-cost sharing and the integrated system result in the same replenishment decisions and system performance if and only if the supplier’s reservation cost is equal to the minimum supply chain total cost of the integrated system. This result implies that VMI and the integrated system may lead to different replenishment decisions and system performances, while providing a condition under which VMI can coordinate the supply chain with out fixed transfer payments. On the other hand, we also show how VMI with fixed transfer payments and stockout-cost sharing can be designed to achieve supply chain coordination regardless of the supplier’s reservation cost. We also provide several interesting computational results. In particular, our results suggest that VMI with stockout-cost sharing performs very well when the supplier’s reservation cost is close to the minimum supply chain total cost of the integrated system, but that it may perform significantly worse than the integrated system, especially when the supplier’s reservation cost is small or the storage limit is small.