A major change is brewing in the basic materials industry in Germany. Over the past decade, most suppliers of basic industrial products—metal, chemicals, wood, paper—have focused their strategies on cutting costs and improving quality. However, faced with flattening cost curves and virtually identical product quality, leading companies have started to take a fresh look at how best to compete. They have turned their attention to their customers—and to their customers' customers.

The new approach reflects a radical change in mentality. Manufacturers of basic materials used to see themselves as selling commodities by the ton to buyers on the opposite side of the negotiating table. Now, they are beginning to discard the notion of hard and fast boundaries between themselves and their customers. The new watchword is customer integration: viewing supplier and customer as a single entity and working closely together in order to minimize transaction costs and maximize value to the next customer in the chain. In a sense, customer integration is the process industry's smart version of business-to-business marketing.

Customer integration does not come easy. Developing a genuine partnership with customers takes time and resources. Yet this is precisely the reason why the approach works so well in the...