That squishy part compresses into the steel cup. When the steel cup touches the steel axle pad, there is no more up. That isn't what is happening in your picture. And it is unusually rare to be in a need to reduce the factory bump stops. Which suggests something else is going on.
Do your shocks reach full compression before the steel bits of the bump stop assembly touch each other? Is something else crashing into another hard part?
Most importantly, did you cycle your axles without springs so you can see what is going on in a controlled manner?