It has been shown that the supply chain re engineering is one of best approaches to improve their competitive advantage by many successful business stories. It is necessary and important to analyze every strategy for the supply chain re engineering. In this paper, we study the issue of what is the effect of the inventory decision mechanism of the supply chain performance, in which one retailer will replenish its inventory from one manufacturer who will manufacture this product. What we study in this paper is three kinds of inventory decision mechanism in the supply chain: the retailer as Stackelberg leader, the manufacturer as the as Stackelberg leader, and the joint decision making by the retailer and the manufacturer. Under the assumption of EOQ model, we find that the “double marginalization effect” exists in this kind of supply chain, which will help us design a good supply chain re engineering strategy.