Competitive environment due to global networking callsfor cost reduction in a serial multi-echelon inventorysystem. One of the keys to cost reduction is thecollaboration of the supply chain. Many practicalresearches have been done in the collaboration of theinventory system in recent years. The collaborationinvolves the joint decision making among the producer,the distributor and the retailer in the supply chain. In thispaper, we develop an economic lot size model for aproducer-distributor-retailer serial inventory system usingthe principle of strategic partnership. Numerical result inthis study indicates that significant cost reduction isobtained when it is compared with the existing models.