As cannon foder. If I'm being honest I rather preffer human only PCs and everything else is a monster. Just like in the original folk tales that inspired the Brothers Grim.
I'd argue that while in original folk tales non-humans were very rarely PC's - they were also nowhere near of being cannon fodder regular monsters, this was shit you left for dunno wolves or bandits. Fey creatures, faerie, sidhe, Slavic divs, Germanic aelphs, those are vast variety of beings, whose narrative purpose were usually way interesting than KILL IT, and morality was often somehow grey, blue-orangey one. They could be wicked, or helpful, quite often whimsical, and acting in a way of certain irrationality.
The problem with this approach is one of niche protection. If you have savage goblins living in swamps, what's the point of Bullywugs. Desert dwelling goblins then no need for Gnolls. Etc. I've found that over the years I've been radically reducing the number of type of monsters running around. Ogres, giants, Titans, Ettins, Cyclops, Amazons, et al are one race. Manticores, Chimeras, griffons, displacer beats, et al are type of creature spawned from chaos. And thus, goblins ended up as nothing but runt orcs in the same manner as Trollkin.
Well D&D quickly jumped out of proper PC niche protection, I doubt monster niche protection was ever a thing.
But I agree - trimming your setting, leaving less but more interesting is good way to work.
In my FR I tried to move goblins into more ambivalent race sharing somehow tinkerish tendencies with gnomes, to much less intelectually, but the same I did with orcs and other goblinoids.
In my own attempt at setting I was planning to merge goblins, gnomes and kobolds into one race of suricatte/rodent based small humanoids who are very much inventors and tinkerers, but they were by decision of my players not counted among Races of Empire (I give each choice to add one from longer list, with Hobgoblins/Lion/Bearfolk being must be, as rulers of Empire) so I never put much thought into their overall design. But definitely as all my sapient races - having wide array of moral attitudes.