Abstract: This paper aims at the cost reduction of the joint inventory as a alliance constituted by a supplier and a retailer.The cost difference of the supply chain before and after implementing the joint inventory is calculated by considering the shortage cost into the inventory cost analysis model.The reduced cost is regarded as the residual income,which is distributed between the supplier and the retailer based on the Rubinstein bargaining model.Theoretical analysis results show that implementing the joint stock system reduces the cost of the supply chain,gets the amount of cost reduction,and allocates effectively the amount of cost reduction between the supplier and the retailer.An example demonstrates the feasibility and maneuverability of this method.