This paper considers a vendor-managed inventory(VMI) system with one wholesaler and multiple retailers. The
wholesaler replenishes its inventory from an outside supplier, and ships them to different retailers who are distinguished
by their contractual prices and backorder costs. An analytical model is proposed to coordinate the inventory and shipment
decisions, and ration inventory among various retailers. Firstly, the optimal rationing policy is compared with the optimal
first-come first serviced(FCFS) policy. Then the reduced rationing policy is compared with the reduced FCFS policy. The
results show that the performance under the reduced rationing policy is always better than that of reduced FCFS policy, while
the optimal rationing policy is superior to the optimal FCFS policy most of the time.