Abstract: Targeting at profit distribution, with stockout cost considered, supply chain parameters are analyzed based on the comparison of inventory cost modes before and after vendormanaged inventory (VMI). It is found that the responsibilities and benefits between suppliers and retailers are inconsistent. Then, Stackelberg model, revenuesharing contracts, and price contracts are applied to establish a profit distribution model. With this model, purchasing price of a retailer and revenuesharing coefficient are decided. A numerical example is used to validate the proposed model.