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One fundamental requirement for obtaining smooth, well cut veneer is a sharp knife. A dull knife require more force to peel veneer from the log. The tendency to bow the bolt, as additional nose bar or roller bar pressure is required, makes a sharp knife essential.
The actual knife setting can complement operating of the backup-roll. Adjusting the knife to peel a slight hour glass shape into the core helps the backup-roll do its job. Baldwin (1981) indicates one of two methods can be used for successful knife adjustment.
Knife hardness, thickness and wearability are qualities important to the mill operator. The lathe knife hardness usually 56 to 58 on the Rockwall scale, is determined by wood density, frequency and magnitude of hard knots, and bolt temperate(Baldwin 1981). The softer the metal the easier it is to grind and hone, the harder the knife the greater the resistance to damage. The knife choice is determined by species, log grade and wether the blocks are preheated prior to peeling.
Positioning the veneer knife correctly plays an important role in producing quality veneer. It also determines uniformity of veneer thickness. Baldwin (1981) suggests for best results the lathe knife tip should be set at or very near the horizontal centre line of the lathe spindles. Setting the knife above the spindle centre line (see Pic 1 ) decrease the knife cutting angle in relation to the same knife position at the centre line. Setting the knife tip below the spindle centre line (see Pic. 2) increases the knife angle in relation to the peeling block. As the diameter of the bolt decreases the knife angle decreases significantly . The resulting peel thickness will vary with log diameter(Baldwin 1981).
Picture 1:- Knife setting above the centre line

Picture 2:- Knife setting below the centre line

These and other problems can be avoided if the lathe knife is set at the proper elevation. Baldwin (1981) suggests several steps to effectively set knives.
Frequently lathe back up roll manufactures recommend setting the top of the cutting edge 0.077 cm below the spindle centre line. The back up roll pushing downwards should cause the knife to cut on the spindle centre line.
When renewing the knife face, a concave of 0.0075 cm to 0.0125 cm is usually ground into the face. A procedure that decreases the bevel taper and greatly aids knife honing. Becoming increasing common is the micro bevel, commonly 0.025 to 0.05 cm wide, which is filed on the back side tip of the knife. A Canadian study states that a micro bevel makes possible a reduction of the angle of the knifes main bevel which in turn decreases veneer looseness (Feihl and Godin 1967b)>