This paper considers a two-echelon decentralized supply chain system with two actors, a logistician and a manufacturer. The problems of production, storage and transportation planning at tactical level using capacitated lot-sizing models are being studied and decentralized decision making is being considered. To achieve good economic performance, as in the centralized case, the two actors have to coordinate with each other to negotiate the quantities they exchange in the planning horizon. A coordination mechanism based on the negotiation process proposed by Jung et al. (2008) is being studied. Two major problems, imbalanced holding costs and storage capacity problems, which cause the decentralized planning under-performs the centralized one are identified. Hence, a modification on the original negotia-tion process is proposed in this paper to improve the efficiency relative to the storage capacity problem. The improved negotiation process is proved the converge ability, and computational results have clearly indicated economic benefits.