Catalog Item Best Practices

I am asking for any SME on Catalog Item regarding the best practices for catalog item creation.

My current team is working on catalog item optimization and transitioning to CSDM.

They have more than 400 catalog items and they want to limit it by creating 4 catalog items and each catalog item has 100 catalog items in it, the only categorization on that one is a selection box and variable set. Backend is like 1 flow and multiple sub flows in it. I'm not sure if this is a best practice for that. Please let me know your insights.

Kindly let me know if you have any alternative solutions.

Thank you.