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The default tool (#1 in the software) is a
electronic edge finder and is set to 4.00". By zeroing on the part with
this tool the mill will know the length (quite accurately) of any other tooling
as long as it has been measured and entered into the software. White paint
pens are used to mark the tool holders with a number that matches the database
shown below.

Here is the first page from the Mill Master software showing the default (#1) tool holder and its length (3.997") When you select a different tool the mill will know the length and the new cutter will be zero'd in the Z axis. The accuracy is quite good. For mission critical parts one would want to switch to the desired tool and re-zero the Z axis on the part.