What I usually do is, first, to do all lookup of information using a database; not the file system.   Then, for storage of those items, I use a nested-subdirectory structure.

So, for example, “problem report #1234567” might be stored in /probs/123/456/prob1234567.xml.   And the database-entry would contain this full pathname to this file.

This (arbitrary example) filing arrangement makes it easy to locate things (whether you are using the database or doing something manually), and it entirely avoids any issues associated with putting an impractical number of filenames in a single directory.

Since the database contains a full pathname, it also leaves open the possibility of rearranging the information in the future, or of making some impromptu change or exception to it.   The item’s location is set when the item is stored, and the item is properly (and arbitrarily) cataloged.   Much like we did when libraries actually had card catalogs (and paper books).