Organizations are under constant threat from global competition, socioeconomic factors, and political forces that are often unforeseen and dynamic. Consequently, decision makers adopt strategies, some including the principles of modularity, as a countermeasure. The problem addressed in this study was the lack of knowledge about the significance of modularizing contract manufacturing organizations (CMOs). The purpose of this quasi-experimental study was to assess the significance of modularizing CMOs by statistically analyzing capacity utilization, efficiency, and profit margin between modular and nonmodular departments in a focal CMO. This study was grounded in the theory of modularity and the research question addressed what might be the significant value of implementing organizational modularity. The hypotheses posited that a significant difference exists in these metrics between the modular and nonmodular departments of the focal company. ANCOVA was applied to the hypotheses using secondary data of complete job orders undertaken at a company from 2008 to 2013. The results indicated significant differences in capacity utilization, efficiency, and profit margin between modular and nonmodular departments after controlling for differences based on overhead cost or lead-time. Decision makers in manufacturing companies, particularly those in CMOs, may benefit from these findings because they provide answers to questions on the value of modularizing CMOs. The social change implications of this study are based on companies gaining knowledge to improve productivity, manufacture more affordable goods, and provide more skilled employment opportunities. As a result, more people leave poverty and experience an improved quality of life.

Organizations are under constant threat from global competition, socioeconomic factors, and political forces that are often unforeseen and dynamic. Consequently, decision makers adopt strategies, some including the principles of modularity, as a countermeasure. The problem addressed in this study was the lack of knowledge about the significance of modularizing contract manufacturing organizations (CMOs). The purpose of this quasi-experimental study was to assess the significance of modularizing CMOs by statistically analyzing capacity utilization, efficiency, and profit margin between modular and nonmodular departments in a focal CMO. This study was grounded in the theory of modularity and the research question addressed what might be the significant value of implementing organizational modularity. The hypotheses posited that a significant difference exists in these metrics between the modular and nonmodular departments of the focal company. ANCOVA was applied to the hypotheses using secondary data of complete job orders undertaken at a company from 2008 to 2013. The results indicated significant differences in capacity utilization, efficiency, and profit margin between modular and nonmodular departments after controlling for differences based on overhead cost or lead-time. Decision makers in manufacturing companies, particularly those in CMOs, may benefit from these findings because they provide answers to questions on the value of modularizing CMOs. The social change implications of this study are based on companies gaining knowledge to improve productivity, manufacture more affordable goods, and provide more skilled employment opportunities. As a result, more people leave poverty and experience an improved quality of life.