We examine two VMI systems between a supplier and a customer: VMI with stockout-cost sharing and VMI with fixed transfer payments and stockout-cost sharing. In our VMI systems, the customer designs and offers a VMI contract to the supplier. The supplier can accept or reject the contract and, if he accepts it, manages the inventory at the customer and makes replenishment decisions. The customer and the supplier minimize their own costs in designing a VMI contract and making replenishment decisions, respectively. In particular, the supplier has a reservation cost such that he accepts the contract as long as his minimum cost under the contract is less than or equal to his reservation cost. The supplier’s reservation cost may be determined by his negotiating power, or, if the supplier and the customer are currently operating under a traditional system mode, it may be his cost in the current system.