Being born with too small or absent lacrimal (tear producing) glands is genetic in Yorkies so she absolutely shouldn't be bred.
There is a surgery available to correct KCS (dry eye). A salivary gland is rerouted to the eye. I have discussed the surgery with both Lady's private ophthalmologist and the ophthalmologists at NC State Vet School, but Lady is not a candidate because of her age. It is the longest surgery they do, about three hours. It is also not without complications according to my ophthalmologist. Some dogs are actually allergic to their own saliva. Excess tearing is also a problem - a constantly wet face. The pros and cons have to be very carefully weighed with your ophthalmologist, however it is usually recommended in a puppy or young dog.
KCS is very expensive to treat and treatment is lifelong. Dogs with KCS should see an ophthalmologist at least annually, preferably twice a year. Since her condition is congenital, it won't respond to tear stimulators. Applying artificial tears every 2-4 hours is very important. I use Genteal severe eye formula and it runs me about $50 a month. Will someone be with her during the day to apply the artificial tears 24/7?
Dogs with KCS are prone to infection and eye ulcers. Lady had an infection this summer that cost me $1,000 to clear up. Those little bottles of eye drops are close to $100 each! Eye ulcers also require medication and sometimes do not heal on their own. They may require surgery (a graft) which runs several thousand dollars.
Eventually scar tissue will build up on the eye and the dog will lose her vision. I am not trying to scare you, but just give you a realistic picture of what caring for a dog with KCS involves.
Here is a very good article:
KCS (Dry Eye)