Is there a word for when a manufacturer removes a bit of material from the thing they are making to reduce cost? The image a have here is a drawbar lock. The circle and small square are not functional, the manufacturer just leaves out that amount of metal because it is not necessary.
Shrinkflation is the closest word I could come up with.
Shrinkflation: In economics, shrinkflation is the process of items shrinking in size or quantity, or even sometimes reformulating or reducing quality while their prices remain the same or increase. The word is a portmanteau of the words shrink and inflation. [Wikipedia]
The correct word to use depends on intended context.
To reduce overall costs even if the reduction requires new manufacturing steps, use "economising".
If economising is a new demand because of economic factors (e.g., material costs have increased), use "retraction". This is probably the most applicable term to the picture shown in the question.
If the material removed is removed because the finished product doesn't require it and because the material being removed is detrimental to the product's purpose (e.g., flash--the excess metal especially around edges left behind by imperfect casting, forging, etc.), use "trimming".
This video shows a drawbar and a drawbar lock in use.
The speaker calls the cut-out notch “manufacturer prowess” (the piece is melted down and the material reused). The rectangular cut-out goes over the drawbar to keep it from rotating. The lock weighs about four pounds; at issue is a tractor pulling a trailer.
The term “skimping” is used in the video to refer to using insufficient material (too light-weight for the demands to be placed on it), but this particular drawbar does not involve skimping.