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The purpose of this paper is to analyse health service supply chain systems. A great deal of literature is available on supply chain management in finished goods inventory situations; however, little research exists on managing service capacity when finished goods inventories are absent.

System dynamics models for a typical service‐oriented supply chain such as healthcare processes are developed, wherein three service stages are presented sequentially.

Just like supply chains with finished goods inventory, healthcare service supply chains also show dynamic behaviour. Comparing options, service reduction, and capacity adjustment delays showed that reducing capacity adjustment and service delays gives better results.

The study is confined to health service‐oriented supply chains. Further work includes extending the study to service‐oriented supply chains with parallel processing, i.e. having more than one stage to perform a similar operation and also to study the behaviour in service‐oriented supply chains that have re‐entrant orders and applications. Specific case studies can also be developed to reveal factors relevant to particular service‐oriented supply chains.

The paper explains the bullwhip effect in healthcare service‐oriented supply chains. Reducing stages and capacity adjustment are strategic options for service‐oriented supply chains.

The paper throws light on policy options for managing healthcare service‐oriented supply chain dynamics.