Hi Kristina,
My company does both software and hardware/instrumentation development and manages and maintains design inputs through Contour. So by virtue of that, hierarchy is vital to understanding coverage and maintaining traceability across the multiple documents that are eventually produced and stored in our Design History File.
As an example, we might have a requirement that is under a folder (in Contour) or heading (in our report) of "Electrical Requirements". Then we may have a hazard that is related to that requirement under "Shock Hazards". This may also be intertwined with a failure mode that's found under "Electronics". All of these items will link to several "Electrical Specifications" that allow us to meet the original requirement, while mitigating the hazards and/or failure modes associated with that requirement. Technically, even without the hierarchy I could have all of these items in a large single-level list of reqs/hazards/failures modes/specs and they could trace the same way, but from a human-reviewer perspective, the hierarchy is very helpful in understanding how various reqs/hazards/failures trace to various specs.
Additionally, hierarchy is used as a jumping-off point when we write our design verification and design validation plans and reports. Since we have many different pieces that all need to come together for a final product (and many different engineers or groups of engineers responsible for each item), we generally split up verification/validation plans into smaller parts to divvy up responsibilities efficiently and quickly. Hierarchy allows us to quickly do an initial pass in splitting up writing and performing those test plans. Using my example from before, all of the System Design Specifications associated with "Electrical Specifications" may go to one or more EEs, and we'll have analogous scenarios for mechanical, software, integration, and other "specification buckets" (so to speak) that are divvied up accordingly.
Another thing to note is that our reviews generally take place outside of Contour. While technically, in the example in my original post, there is no real difference in whether a requirement is numbered Req-3 or Req-167 or Req-1 as long as it traces properly to the right specification(s), from a human-readable perspective, the feedback I always get is that it "looks weird". That's why I made the request in the first place--it's mostly for human readability.
Hope that helps!
Jen