Abstract: In this paper, we study coordination problem of a supply chain system consisting of one supplier and one retailer. Under the situation of considering stok-dendent demand the retailer faces, product's retail price related to its storage time,limited warehouse capacity and no shortage,the optimal strategies of the supplier and the retailer are first presented.Secondly,the paper discusses,as the leader,how the supplier designs quantity discount strategies so as to maximize his/herown profit and realize the perfect coordination of the supply chain system.Finally,the theoretical analysis and numerical examples show that quantity discount model is very effective in improving the coordination of the supply chain and the profits of two parties.

Key words: initial-inventory dependent demand, volume discount, the prefect coordination